Government and Taxes

Friday, June 01, 2018

PH stockmarkets 2nd worst performing in the world in 2018

The PH Stock Exchange (PSE) is the 2nd worst performing stockmarket in the world this year (-12.4%) next to Turkey (-12.7%). Dutertenomics is lousy at encouraging more investments, good only at tax-tax-tax, loans-loans-loans especially from China.

Over the last 52 weeks, PSE is also the worst performing in the Asia Pacific. Over the last 3 years (May 2015 vs May 2018), PSE has contracted. The gains of the markets in the last year of the past administration has been erased by the first 2 years of the Duterte admin.

Data from wsj.com.

See also:
AsPac markets after the Korea Summit, April 30, 2018
AsPac markets, PH and ID worst performing ytd, May 20, 2018

EFN Asia 67, Program of Conf 2006, KL

I rediscovered this while cleaning my inbox of old emails. I remember very well that conference because (a) it was my first time to go to Malaysia, (b) a day before there was a one-day forum by Atlas also on trade and I was one of the presenters, and (c) the subject of unilateral liberalization was articulated by several speakers like Aco Patunru (Indonesia) and Barun Mitra (India).

Here's the program 12 years ago.
-----------

Economic Freedom Network Asia Conference 2006

Preferential Trade Agreements

Local solutions for global free trade?

12th - 13th September 2006

Corus Hotel, Kuala Lumpur, Malaysia

Welcoming address

Mohamed Ariff

Executive Director, Malaysian Institute of Economic Research

Kuala Lumpur, Malaysia

Wolf-Dieter Zumpfort

Deputy Chairman of the Board of Directors

Friedrich Naumann Foundation

Berlin, Germany

Mark Mullins

Executive Director, Fraser Institute

Vancouver, Canada

Opening address

YBhg Tan Sri Dato’ Mohd Sheriff Mohd Kassim

Chairman, Board of Trustees

Malaysian Institute of Economic Research

Kuala Lumpur, Malaysia

Introduction of Conference procedure

Mohit Satyanand

Moderator

Session 1: Models of Preferential Trade Agreements

“The European Union’s Strategies and Priorities”

Thierry Rommel

Ambassador and Head of Delegation

Delegation of the European Commission to Malaysia

Kuala Lumpur, Malaysia

“US Strategies and Priorities”

Colin Helmer

Counselor of Economic Affairs

Embassy of the United States of America

Kuala Lumpur, Malaysia

“International Models of Bilateral Free Trade Agreements”

Christopher Dent

Senior Lecturer

Department of East Asian Studies, University of Leeds

Leeds, United Kingdom

Session 2: Impacts of Preferential Trade Agreements in Asia

“The Impact of Bilateral Free Trade Agreements on Human Development in Asia”

Swarnim Wagle

Programme Specialist, UNDP Regional Centre

Colombo, Sri Lanka

“Malaysia and Bilateral Free Trade Agreements”

Mohamed Ariff

Executive Director, Malaysian Institute of Economic Research

Kuala Lumpur, Malaysia

Session 3: Economic Freedom Indicators

“Indicators for Free Trade in Asia. The Economic Freedom of the World Index”

Robert Lawson

Professor, Capital University

Columbus, Ohio, USA.

“Chinese Marketisation Index”

Wang Xiaolu

Deputy Director, National Economic Research Institute

Beijing, China

“Capital Freedom Index”

Feng Xingyuan

Cathay Institute of Public Affairs

Beijing, China

“Chinese Public Governance Indicator”

Mao Yushi

Unirule Institute of Economics

Beijing, China

Session 4: Regional Trade Agreements in Asia

Panel Discussion on the South Asian Free Trade Agreement

Ugen Tschup Dorji

President, SAARC Chamber of Commerce and Industry

Bhutan

Rajesh Mehta

Senior Fellow, Research and Information System for Developing Countries

New Delhi, India

Dushni Weerakoon

Deputy Director, Institute of Policy Studies

Colombo, Sri Lanka

Panel Discussion on East Asia Free Trade Area

Kriengsak Chareonwongsak

Member of Parliament and Executive Board Member, Democrat Party

Bangkok, Thailand

Arianto Patunru

Deputy Director, Institute for Economic and Social Research, University of Indonesia

Jakarta, Indonesia

Young-Han Kim

Professor, Sungkyunkwan University

Seoul, Korea

Session 5: International Perspectives on Regional Trade Blocs

Ricardo Lopez Murphy

Chairman, Cívico-Republicana Foundation

Buenos Aires, Argentina

Andrej Illarionov (requested)

Director, Institute of Economic Analysis

Moscow, Russian Federation
---------------

See also:
EFN Asia 64, Day 2 of Conference 2016, February 16, 2017
EFN Asia 65, EFN panel at Jeju Forum 2017, June 20, 2017
EFN Asia 66, Meeting 2017 in Kuala Lumpur, September 22, 2018

Thursday, May 31, 2018

BWorld 216, Positive and negative disruptions in the electricity market

* This is my article in BusinessWorld last Monday, May 28, 2018.

Last week, May 22, a BusinessWorld report said “DoE forecast for peak power demand exceeded on May 17” referring to 10,688 MW peak demand in the Luzon grid on May 17 reported by the National Grid Corp. of the Philippines (NGCP) vs peak demand in 2017 of 10,054 MW.

The increase of 634 MW or 6.3% increase can be considered as positive disruption. Demand for electricity to power various economic activities by households and corporations including those with 24/7 operations remains high and they approximate GDP growth.

Reports of more renewable investments and installations, wind-solar especially, are not “disruptors” because in 2017 or nine years after the enactment of RE law of 2008, solar-wind contribution to total electricity generation in the Philippines constituted only a measly and near-negligible two percent (2%).

Reports also of more battery storage for intermittent wind-solar can neither be considered as a “disruptor” because those batteries do not produce electricity. If it is cloudy or raining then there is no extra solar power to store; if the wind does not blow then there is no extra wind power to store.

During the BusinessWorld Economic Forum 2018 last May 18 at Grand Hyatt BGC, among the speakers were Kristine Romano of McKinsey & Company, and Luis Miguel Aboitiz of Aboitiz Power Corporation. Ms. Romano partly mentioned that innovations in the energy sector is among the big disruptors in the world today. Mr. Aboitiz skirted discussing his sector and mentioned more about the challenges and opportunities of endless innovation and disruption in many sectors.

And we go back to renewables touted as disruptor to “save the planet” (save from what, rains and floods?) and there is one belief or myth that continues to persist — that the cost of wind-solar technology is declining quickly so the cost to generate electricity from them will decline too.

Intermittent or variable renewable energy sources (VREs) are given feed in tariff (FIT) or guaranteed price subsidies for 20 years, among many other perks, by the RE law of 2008 (RA 9513). What happened to this scheme?

First, the FIT rates given to RE developers keep rising yearly, despite the touted decline in the cost of wind-solar, and second, the estimated revenues per kWh is are highest for wind-solar and lowest for run of river (RoR) hydro (see table).

Bangui Wind 1 and 2, built in 2005 then August 2008 or before the enactment of RE law in 2008, a bit anomalous, were also given special FIT rates: P6.63/kWh in 2015; P7.05 in 2016; P7.26 in 2017; and P7.53 in 2018.

Then also last week, May 21, the ERC has granted the rise in FIT-Allowance (FIT-All) in our monthly electricity bill from 18.30 centavos/kWh to 25.32 centavos /kWh starting June 2018 billing. This is to cover under-recoveries in 2017 alone.

And that explains the negative disruption in the Philippines electricity market. Energy coming from “free” solar and wind and “declining” technology cost actually result in even more expensive electricity.

This higher FIT-All rate includes only under-recoveries until 2017. Under-recoveries this year not included yet, so a higher rate of probably 33 centavos/kWh can be expected in late 2018.

The environmental and RE lobbyists succeeded in making cheaper coal become more expensive via higher coal tax of P50/ton in 2018, P100/ton in 2019, and P150/ton in 2020 under the TRAIN law. Taxes for oil used by power plants also went up as well and expanded VAT application to transmission charges.

Expensive electricity is wrong.

Adding more intermittent, brownout-friendly, and expensive VREs like wind-solar is wrong. Adding battery storage will reduce the intermittency but will definitely raise the cost to consumers further.

Government should take the side of consumers who desire cheaper, stable electricity. Government should stop its double standards in energy taxation, slapping higher excise tax for reliable oil and coal plants but exempting from excise tax the unreliable, unstable, intermittent VREs especially wind-solar.

------------

Tax Cut 32, Rene Azurin on zero income tax

I am reposting this column 11 years ago by a friend, former UP CBA Prof., Dr. Rene Azurin. Rene has published several books. He mentioned me and Vernie Atienza here. Enjoy.

BusinessWorld, July 12, 2007

STRATEGIC PERSPECTIVE

René B. Azurin

Zero income tax

'Zero income tax' has a nice melodic sound. It produces in me the same resonant vibrations as Toyota's 'zero defect' production system and the environmentalist movement's 'zero waste' program. So, given the current hoohah over the BIR's latest failure to meet its tax collection targets, it seems timely to propose that hard-to-collect income taxes be now scrapped altogether and the revenue derived therefrom raised instead through easier-to-collect consumption taxes. This replaces a messy, susceptible-to-corruption system with a simpler, less discretionary one.

I have actually been suggesting this for many years now to any tax official who would listen so I was very glad to learn that my friend and former graduate school classmate, Dr. Veredigno Atienza, has created an advocacy group to lobby for this to happen. The organization founded by Dr. Atienza is called the Philippine Taxpayers Union and it is affiliated with the World Taxpayers Associations, a movement now in 42 countries that grew "out of the desire of citizens to protect themselves from the increasing tax claims of the state." I think that is an excellent reason for citizens to band together. Taxes, after all, are forcible impositions made by those with power on those without it. From a historical perspective, these are qualitatively no different from the tong extorted from people by the ancient predatory bandits who called themselves kings. In fact, taxes can be effectively looked at as the goods that the productive members of the community are compelled to give up in order to support the lifestyles of a non-productive group of individuals sometimes called politicos.

Of course, in a modern democracy, taxes are supposed to be payments for certain support services – like maintaining order and administering the system of justice – performed by the politicos who capture control of government power. Accordingly, citizens are well in their rights to demand that the goods they are forced to give up is used in the proper manner and not used to enrich parasitic politicos who think that they are entitled to lavish compensation for what they imagine is productive work. From a practical standpoint however, citizens have no real power to make that demand – since politicos wield the coercive instruments and armed might of the state – and this is why it is necessary for individual citizens to band together to achieve the small modicum of power possible through concerted group action.

The WTA and its member associations like the PTU support initiatives that "limit tax burdens, prevent unjust harassment by tax collectors, and provide clear information about government taxation and expenditure." In a recent forum organized by Dr. Atienza, PTU Secretary-General Bienvenido Oplas Jr. presented a paper arguing for the abolition of income taxes and making consumption taxes the main source of government revenue. Principally, he argued that income tax collection is "very bureaucratic, discretionary, costly, and corruption-prone… (because) people do not want to divulge their true income… (and it is) cheaper to hire good accountants and lawyers and bribe revenue collectors than pay the full income tax liability." Additionally, Oplas argued that individuals and enterprises that engage in economic activities – by producing goods, services, and jobs – "already serve welfare functions in society… and they should not be penalized with income taxes and bureaucratic licenses and permits."

I agree completely. Taxes based on consumption are simpler to administer since these are collected from merchants and businesses which constitute a far smaller number than the number of individual taxpayers. Consumption taxes are also inherently fairer. The more you consume, the more taxes you pay. Moreover, this is more consistent with individual freedom because it allows each consumer to spend all that he earns in a manner that maximizes his satisfaction while still generating for the government the required amounts to fund support services. To address social welfare concerns, consumption tax rates can be set higher for non-essentials like cars and condos, and lower for essentials like food and medicine. Certain basic commodities like rice and galunggong can even be exempt from any consumption taxes whatsoever.

If one grants that the present national budget of some P1.1 trillion is a reasonable imposition on the producing classes of our society, then the required tax bite will amount to some 17% of the aggregate

value of goods and services produced domestically (assuming a GDP of around P7 trillion). The amount in tax take to be foregone from the abolition of personal and corporate income taxes – I believe this was around P881 billion in 2006 – can actually be drawn from various consumption-based taxes already being collected like value-added taxes, sales taxes, excise taxes, real property taxes, vehicle registration taxes, travel taxes, amusement taxes, and import duties. How this is to be distributed just takes a little arithmetic.

One might also argue however, as PTU does, that scrapping income taxes will actually expand the total tax base and therefore allow a desired tax take to be raised with not too high an increase in the prevailing rates of existing consumption-based taxes. The argument made is that zero income taxes will stimulate business investment, generate greater economic activity, and bring currently underground businesses (the so-called informal economy) out into the open. This can mean increased government revenues even with lower taxes per taxpayer. And there will be less corruption. In the end, this translates into faster growth for the economy as a whole.

So, citizens, let us band together and support this initiative. A zero income tax system is good for all of us. But not, maybe, for some people in government.

-------------------

See also:
Tax Cut 29, Culture of exemptions and culture of envy, February 06, 2017
Tax Cut 30, Trump's 20% CIT, deregulation, October 09, 2017
Tax Cut 31, Talk at Deloitte TRAIN forum, January 2018, February 11, 2018

Tuesday, May 29, 2018

BWorld 215, Urban mobility index and transport disruption

* This is my column in BusinessWorld last week, May 24.

As incomes rise around the world, they tend to stay within cities, urban hubs, and rural areas on the cusp of urbanization. Congestion follows as a result, even if property developments are done vertically.

After searching for an international transportation or mobility index that includes Metro Manila or the Philippines, I found one made by the Arthur Little Consultancy. They developed the Urban Mobility Index, a point system with 100 points as the perfect score.

The index is composed of three groups of urban mobility systems: Maturity of the system (36 points), Innovation (24 points), and Performance (40 points), with nine topics in each group. These are: Transport-related CO2 emissions, NO2 concentration, PM10 concentration, PM2.5 concentration, Traffic-related fatalities, Increase share of public transpo (PT) in modal split, Increase share zero-emission modes, Mean travel time to work, and Motorization level.

The second biggest group, Maturity, and its nine topics are: Financial attractiveness of PT, Share of PT in modal split, Share of zero-emission modes, Road density, Cycle-path network density, Urban agglomeration density, Public-transport frequency, Urban mobility initiatives, and Urban logistics initiatives.

About 100 cities worldwide are covered. Surprisingly, Metro Manila has scored moderately and not in the lowest group of cities (see Table 1).

People may wonder why Metro Manila has ranked higher than Osaka or Sydney or Kuala Lumpur. Perhaps the surveyors and researchers covered only the EDSA area where a train — however cramped — exists and jeepneys and tricycles are banned. Vehicles move along at slow speeds during rush hours.

Disruption in urban mobility was first made by MRT/LRT a few decades ago. However, an increase in capacity was few and far in between, resulting in a persistent “transport crisis.”

The second round of disruption was made by vans and UV expresses, which help ferry passengers from high density locations and help them avoid taking multiple rides to their destinations.

However, this local initiative was restricted by the government via the LTFRB as it severely limited the franchising of UV express vehicles and heavily penalized vans that were “colorum (unregistered).”

A third round of disruption was introduced by a multinational company, US-based Uber. It was so successful, it inspired a regional competitor, Singapore-based Grab, to offer the same service.

Unfortunately, the LTFRB kept to its antiquated regulations, restricting the number of cars to serve both Uber and Grab. It later penalized Uber with a substantial fine.

Plagued with its own financial issues, Uber later decided to quit Southeast Asia and merge with Grab.

Meanwhile, actions of the LTFRB leave much to be desired.

Of the 19,000 Uber drivers, only 11,000 were absorbed by Grab since these were the only ones accredited by the LTFRB.

Some 6,000 former Uber drivers are still waiting accreditation and are unable to drive for Grab because they are not in the LTFRB master list while some 2,000 ex-Uber drivers have possibly given up (see Table 2).

Grab Philippines Country manager Brian Cu brought this up during his presentation during the BusinessWorld Economic Forum 2018 on May 18 at Grand Hyatt Hotel, BGC in Taguig City. The forum’s theme was “Disruptor or Disrupted: The Philippines at the Crossroads.”

Ride-sharing and TNVS scheme are disruptors in urban mobility system and thousands of commuters have benefited. The LTFRB and government bureaucracy have disrupted this in their own way, resulting in increased inconvenience for TNVS passengers.

To this day, the LTFRB continues to control fares and cap surge pricing, a move that discourages drivers from getting incentives for picking up passengers even in inhospitable areas. This, despite the fact that the agency has already limited the number of accredited drivers, as discussed previously.

Providing comfortable, convenient, and safe transportation is not a crime and government has no business limiting this kind of entrepreneurship. Government should instead further expand competition, stay away from price and fare control, and allow commuters to have more choices.

---------------

Energy 109, Sudden decline in world oil prices

Good news and bad news. The good news is that world oil prices are declining in recent days, WTI for instance fell from $72 last week to only $67+ yesterday, so we can expect lower domestic oil prices around next week.

The bad news is that the $80/barrel Dubai crude threshold may not be reached anymore, so oil tax hikes part 2 by January 2019 under TRAIN will continue, another round of oil price hikes.

Either way, there will be more tax money for Dutertenomics. Higher world oil prices mean higher domestic prices, higher VAT collections. Lower world oil prices means the $80 threshold won't be reached, so part 2 of oil tax hike will proceed by January 2019. Whether higher VAT collections or higher excise tax collections from oil products, more money and jumping with joy for Dutertenomics.

Two main reasons for this. One, US oil production is ramping up fast, 10-11 M barrels per day (mbpd) seems easy. Hitting 12 mbpd may be reached this year or next year. Two, Saudi and Russia are scared of losing some of their market share if they continue the production cut, so they too have to raise their output.

High oil prices can "kill cars" dream of the ecological socialists?

Far out. That would mean more motorcycles, more tricycles, more e-bikes and more chaos on the roads. And that won't happen. People would cut their spending on expensive schools and meals, expensive houses, etc but they won't let go of their cars. The multiple ride system if one does not have a car, either owned or via ride-sharing/TNVS, is inconvenient. It means tricycle from house to nearest road with jeepney or bus, then jeep/bus, then MRT/LRT, then jeep again to destination. Reverse the process going home, about 6-8 rides a day. Inconvenience, susceptibility to thieves and maniacs.

---------------

Saturday, May 26, 2018

BWorld podcast 2, TNVS fare and surge control are wrong

My second podcast in BusinessWorld was posted last May 17, 2018.

I discussed there what I frequently argue in my column -- that government interventions in pricing in a deregulated sector is wrong, that price and fare control is wrong. Government restrictions in number of land transportation franchises and transport network vehicle service (TNVS) like Uber, Grab, new players like Hirna, are wrong.

Government should encourage more players and competitors per sector, per industry. Consumers and commuters must have more choices in ride sharing.

See also: BWorld 156, Integrated PPP vs hybrid PPP, October 04, 2017.

Climate Tricks 67, Alarmists with deep-seated intolerance

Last May 22, a friend Joe Real, posted this in his fb wall, praising the automakers and attacking Trump about climate change.

Carmakers to Trump: 'Climate change is real'

BY MORGAN GSTALTER - 05/22/18 08:27 AM EDT

http://thehill.com/regulation/energy-environment/388736-carmakers-in-letter-to-trump-climate-change-is-real

Joe is the older brother of my classmate in high school in Cadiz City, Negros Occidental. He is among the bright boys our city has produced because he went to Philippine Science High School, then UPLB, Agri Engineering. He has lived in California for many years now.

We have debated a few times in the past over climate and energy issues, he taking the alarmist side while I take the realist/skeptic side. One time he deleted my comments, also the comments of his other friend who disagreed with him on his "more renewables to save the planet" argument. It was some sort of an alarm bell for me but I let it pass. So I commented in his post,

At first I did not read his entire response so I followed up with these questions:

Joe, Pls show (1) of the recent CC say the past 200 years, how much is nature-made vs man-made? Proof?

(2) Medieval warm period, how much was nature-made vs man-made? Proof?

(3) Roman warm period, how much was nature-made vs man-made? Proof?

No numbers means crystal ball hula-hula, hahaha.

Then I re-read his comments and realized that it was full of unsubstantiated claims and personal attacks, of deep-seated intolerance at being questioned of his belief.

See these for instance and my comments in his thread:

(1) "climatic changes which is very rapid compared to any other geological times" -- where are the proof of this? rapid by how much, 2x, 50x, 100x? Proof and links? say compared with the Medieval warm periodA? Roman warm period?

(2) "you are being part of the problem because you loved fossil fuels as your livelihood." -- Where is your proof, Joe? I wish that was true so I will be rich now. You are guided by emotionalism and voodoo science to make fake and stoopid claims,

(3) "I am writing this in hope that your future children or your future relatives will vilify what you’re doing." -- my children enjoy riding an airplane that uses fossil fuels. If I make them ride giant kites or giant brooms to fly to Negros or Iloilo, they will vilify and hate me.

Now look at yourself and your lifestyle -- you post your travels to far away places, meaning you did not ride giant kites but giant airplanes that use fossil fuels, then you hate fossil fuels. That's 101% hypocrisy double talk, Joe.

(4) "you don’t have any credentials to show, so you only have an opinion that’s worth nothing much except create some noise." -- horrible, if one cannot confront the issues and counter-arguments, just do endless personal attacks.

Again, answer this, you who have "credentials":

(1) of the recent CC say the past 200 years, how much is nature-made vs man-made? Proof?

(2) Medieval warm period, how much was nature-made vs man-made? Proof?

(3) Roman warm period, how much was nature-made vs man-made? Proof?

I did not realize that his intolerance at being questioned is so deep, so wild. He will make fictitious claims like "fossil fuels as your livelihood", I think only highly emotional and intolerant minds would make up stories like that.

I like fossil fuels not because I earn money from those companies. Never worked for any of them in the past and the present, not even part time or consulting work. I like fossil fuels because they gave humanity modern and more convenient lives. I drive a car that uses gasoline; I ride airplanes that use aviation turbo; we cook in the house on LPG, not on firewood or charcoal/biomass; we have 24/7 electricity and internet mainly because of coal, natural gas and oil-based peaking plants, all fossil fuels. Without fossil fuels, life will be horribly dark, inconvenient and backward.

Joe's intolerance and emotionalism like Al Gore-UN-CCC-WWF-others are based on voodoo science.

Joe's other friend, Paul Sarmiento, also made some good observations:

Joe Real To prove that the current change in climate is mainly due to man, you have to clear all doubts that natural climate variability is smaller than human caused forcing. Unfortunately, as I have been arguing across different fora, the records we have is too short and too sparse to draw any conclusions from.

But of course you would ignore that since you've been an AGW believer from the get go. Open your mind and use critical thinking. Use your statistical skills and not rely on conclusions from other scientists. Their own data will belie what they conclude.

Also the argument that the current warming is faster than at any time in history is a phenomena related to the way granularity of data decreases as you average it out over greater time periods.

A good example is the daily swings in temperature is much greater than monthly swings in temperature. And monthly swings in temperature is much greater than annual swings in temperature. This is true in years vs decades, decades vs centuries and so forth. Since current era records are measured in months and years which is being compared to proxy temperature records that are averages over larger periods of time, the fallacy crops up that the current warming is faster than at any time in history.

But a quick way to falsify this notion is to look at the first half of the 20th century vs the 2nd half. Both periods shows a sharp increase in global temperature. From 1900 to 1940 the slope of the temperature rise is almost the same as for the period of 1970 to 2000.

But while AGW theory blames the 1970 - 2000 rise to humans, they cannot attribute the same to the rate of increase in the early 20th century. Therefore, to blame nature for the first and to blame humans for the second is incongruent to the way science works.

--------------

See also:
Climate Tricks 64, Bitter cold and snow are caused by AGW, January 06, 2018
Climate Tricks 65, "Last chance" to save the planet stories, 1992-2018, March 16, 2018
Climate Tricks 66, Ignoring the implications of worsening cosmic rays situation, March 18, 2018

About Me

Friday, June 01, 2018

Thursday, May 31, 2018

Tuesday, May 29, 2018

Saturday, May 26, 2018