ICYMI: e-Payments, Insurance Premiums, Maternity Leave Tax Exemption, And More Financial News

BSP takes advantage of the Central Bank Act, improves e-Payments to help boost domestic growth

The Bangko Sentral ng Pilipinas (BSP) will be contributing more in keeping economic stability in the country by taking advantage of the amended Central Bank Act as well as improving electronic payments.

BSP Governor Benjamin Diokno, in his speech during the Asian Banker’s Finance Philippines 2019 forum in Taguig City last Thursday (October 10), the amended law has improved the agency’s ability along with other financial regulators to manage liquidity and supervise the financial sector.

The amended Charter provides reforms that will allow the central bank to align its operations with best practices around the globe, improve the central bank’s corporate viability, and enhance its capacity in crafting policies on the back of the connections in the financial market and the economy.

This ended the use of money supply and credit levels as bases for determining monetary policy and restored the central bank’s authority to issue its own debt instrument, which is in line with the Governor’s statement that they are thinking of issuing debt instruments in the last quarter of the year.

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The Central Bank Act also maximizes the goal of the recently signed National Payment System Act, which provides for a comprehensive legal and regulatory framework in maintaining a payment system, aiming to control systemic risks and provide an environment conducive to sustained expansion of the domestic economy.

The BSP has reinforced measures to increase the share of digital payments transactions to account for about 20% of the total by 2020 by utilizing financial technology (fintech). In fact, they were able to put up two real-time automated clearing houses, namely InstaPay and PESONet, to help increase electronic payments.

Various banks, on the other hand, are also improving their systems to cope up with the programs implemented by the BSP.

The Central Bank chief even added that the rise in the number of non-bank electronic money (e-money) issuers creates a big impact in the bid to increase the e-payment system in the country.

He disclosed that as of last August 27, there were about 14 non-bank e-money issuers being supervised by the central bank, even adding that the use of quick response (QR) codes are also a plus to the e-payments program that they are creating.

“We hope to see more of this in the future; we hope that even market vendors, cab drivers, and sari-sari store owners will be able to use QR codes as a means to accept payments,” Governor Diokno said.

The BSP is coordinating with industry players for the establishment of a National QR Code Standard that will allow the interoperability of QR Code-based payment facilities.

Insurance industry sees Premium Income go down in the first half of the year

The Insurance Industry posts lower premium income as the uptake of single premium variable products decreased.

According to the Insurance Commission (IC), the industry’s overall premium income went down by 2.64%, P141.9B in the first six months. This is lower than the P145.76B logged a year ago based on the unaudited quarterly reports submitted by life and non-life insurance firms and mutual benefit associations (MBA).

“The decrease in the total premium of the insurance industry can be attributed to the decrease in the uptake of single premium variable products due to global market uncertainty and economic slowdown,” said Insurance Commissioner Dennis B. Funa.

Single premium sales dropped by 52.5%, P20.54B in the first semester from the P43.24B posted in the same period last year.

However, the IC reported that premiums collected from traditional life products grew by 12.55%, from P27.69B a year ago to P31.17B.

“A remarkable increase of 94.97% should also be noted in single premium policies of traditional life insurance from P1.1 billion in Q2 2018 to P2.2 billion in the same quarter in 2019,” he added.

Meanwhile, first-year and renewal premiums for variable life products increased year-on-year by 11.67% and 32.94%, respectively, while the significant drop in single premiums dragged the overall sale of variable life insurance products.

The non-life insurance sector’s net premiums, meanwhile, climbed 12.98% year-on-year to P27.61B from P24.44B from a year ago. Of this total, motor car insurance contributed around 49.47% or the majority of total net premiums.

Likewise, premium income of the MBA sector grew to P5.88B as of June, 13.54% higher from the P5.18B booked from the same period in 2018.

Overall, the industry’s total assets stood at P1.72T in the first half, 11.79% higher than the P1.54T posted in 2018.

The bulk of the industry’s assets or 88.37% worth P1.52T were held in income-generating investments.

The sector’s total investment portfolio also grew 19.59% in the first semester. P1.52T from P1.27T a year ago.

By sector, total investment of life insurers stood at P1.33T, P107.91B for non-life firms, while the MBA sector had P85.25B.

Such instruments comprised 36.21% or P480.93B of the life insurance sector’s total investments, 32.82% or P35.42B of non-life sector’s and 32.84% or P28B for the MBA sector.

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Longer Maternity Leave Pay exempted from tax—BIR

The Bureau of Internal Revenue (BIR) ordered that the salary differential from longer maternity leave for workers in the private sector is tax-exempt because it is considered as a benefit.

“It is clear that salary differential is considered as a benefit,” said BIR Commissioner Cesar B. Dulay in a memorandum.

Revenue Commissioner Dulay cited provisions of Republic Act No. 11210, or the 105-Day Expanded Maternity Leave Act, and guidelines from the Civil Service Commission, Department of Labor and Employment and Social Security System.

He even added that the full pay of workers on maternity leave is exempt from withholding or income tax.

The law requires private-sector employers to pay the salary differential of workers on maternity leave and their average weekly or regular wages for the duration of the maternity leave.

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Congress’ move to lift Bank Secrecy for tax purposes receives additional boost From the BSP

The lobby for Congress to lift bank secrecy for tax purposes was backed by the BSP, which has joined the Department of Finance (DOF) in pushing for the measure.

Finance Secretary Carlos Dominguez III released a statement last Wednesday (October 9) which said that the BSP wants to get involved in efforts to convince Congress that lifting the bank secrecy law is a crucial and indispensable part of granting amnesty to erring taxpayers.

As per the DOF, BSP Governor Benjamin Diokno was the one who informed Secretary Dominguez about the central bank’s position towards the matter.

DOF Secretary Dominguez directed Finance Undersecretary Gil Beltran to make sure that Congress would know the joint DOF-BSP position pushing for general tax amnesty only with the lifting of bank secrecy. He emphasized that the two responsible agencies should be working hand in hand.

In February, President Rodrigo Duterte signed into law a part of tax reform package 1B under Republic Act No. 11213, or the Tax Amnesty Act of 2019, which paved the way for the ongoing estate tax and delinquencies amnesties.

The DOF had estimated additional revenues from the one-year amnesty on delinquencies to reach P21.26B.

Estate tax amnesty, meanwhile, was expected to generate P6.28B during its two-year implementation.

However, President Duterte vetoed the general tax amnesty pending the lifting of bank secrecy for tax purposes as without safeguard.

The Finance department emphasized that such move would only lead to revenue losses for the government and encourage tax evasion.

“The President was constrained to veto the portion of the law covering the general amnesty because of the lack of provisions breaking the walls of bank secrecy, setting the framework for complying with international standards on exchange of information, and other safeguards against those who abuse by declaring untruthful assets or net worth,” said Dominguez.

“Had the President not vetoed the general tax amnesty provision, the law would raise only P6.8 billion in additional revenues in 2019, lower than the estimated P13.6 billion if lifting bank secrecy and allowing the automatic exchange of information was already in place,” he added.

“Indirect revenue losses resulting from enforcement activities would be around P53 billion if the general tax amnesty had pushed through without the safeguards. Lifting bank secrecy and allowing the automatic exchange of information, however, would have generated up to P76.6 billion in direct and indirect revenues in the next five years,” he said.