*This article was originally published in Business Mirror on February 22, 2016 but was updated to reflect current dates.
Whenever the terms “Multi-Level Marketing” or “MLM”, also known as “network marketing”, is mentioned, most people cannot help but conjure up images of cunning scam artists, swindlers or estafadores in the likes of Ponzi or Madoff. We cannot blame the masses though because many unscrupulous people do indeed use these terms in presenting their illegal pyramiding schemes in order to pass it off as valid business models or at least give it some semblance of legitimacy. It has been part of my advocacy in spreading financial literacy to expose these sham companies that have been victimizing many Filipinos, especially overseas workers. In fact, just a few years ago, a popular registered financial planner and I were sued by one of these illegal business organizations for exposing them in our respective Facebook pages by sharing an advisory published by one of the top mutual fund investment companies here in the Philippines denying an alleged partnership with that sham company. It was a criminal complaint for libel. However, unlike my friend and colleague, I did not have to spend money by hiring a lawyer for my defense, being a lawyer myself. Anyway, as expected, the case was dismissed much to our delight.
Nevertheless, the MLM business model, which is a more sophisticated form of direct selling, is in and of itself definitely a legitimate one. It is characterized by face-to-face selling to the consumers through independent distributors, who in turn can recruit other distributors from whose sales the upline sponsors derive override commissions. It has been in existence in America since the 1970s but has only started to gain ground in the early 1990s. It democratized entrepreneurship and the business world which, until recently, used to be the sphere of only for the elite upper class of society. According to former Trade Undersecretary Ernesto M. Ordo, “Direct Selling necessitates the employment of a considerable number of people to effectively carry out the marketing and production activities of these companies. Consequently, not only will additional sales personnel be hired but factory workers as well. As a result, the direct selling sector has the potential to bring additional revenues to the government.” In any case, I will no longer belabor the history of the development of MLM in this article as good books have already been written on that subject such as the ones of Richard Poe entitled Wave 3: The New Era in Network Marketing and Wave 4: Network Marketing in the 21st Century. As for its viability as a legitimate business venture, famous author and celebrity financial coach Robert T. Kiyosaki also wrote the book The Business of the 21st Century. Now you know where I got the idea for the title of this article!
On the other hand, a pyramiding or Ponzi scheme is an illegal money scam where people are convinced to pay money for a chance to profit from the payments of others who might join later. Interestingly, in spite of the proliferation of scammers and the flak the network marketing industry has been getting, we still nonetheless see an unprecedented growth in the number of legitimate companies being established along with entrepreneur hopefuls who join their ranks. Albeit, one important question remains in people’s minds, i.e. “How can we distinguish the legitimate MLM companies from the scams?”
For the uninitiated, it would seem quite confusing because most, if not all MLM companies, including the scams, are duly registered corporations with the Securities and Exchange Commission (SEC). Such being the case, the first and easiest way to verify whether an MLM company you are interested in joining is a legit business or not is by keeping tabs on the public advisories issued by the SEC warning the public about dubious and unauthorized activities that are being carried upon by certain companies. The said advisories are periodically published in its website and in major newspapers. Of course, even though the SEC is a reliable government agency tasked to protect the investing public, its employees and officers are not omniscient being humans just like us. So, we also have to do our part and be aware of certain “marks of a scam” so as not to be duped into investing our hard-earned money into one of those companies.
The second way we can make use of the SEC is by verifying if the company that is soliciting investments through its officers or agents possesses a secondary license because only those, such as mutual fund representatives and stock brokers, are legally allowed to solicit investments from the public by selling securities.
To be sure, before joining an MLM company, ask yourself the following questions:
• Is there a real, good quality product that can be differentiated from others in the market and not just for the sake of having a product?
• Are commissions paid on sales of products and not on registration or joining fees?
• Is the intent to sell that of a product and not a position?
• Is there no direct correlation between the number of recruits and compensation?
• If recruitment were to be stopped today, will the distributors or members still make money?
• Is there a reasonable product return policy?
• Do products have fair market value?
• Is there a compelling reason to buy the product/s?
If the answer to all the questions is YES, then the company being evaluated is a legitimate company; but if the answer is NO, then there is a high probability that it is a pyramid scam or Ponzi/Madoff scheme. For guidance and consultation, I may be reached me thru my email adress email@example.com.
Unlike national taxes, which are under the jurisdiction of the Bureau of Internal Revenue (BIR), local taxes are levied and assessed by local government units (LGUs) such as cities, municipalities and provinces. As regards national taxes, the general governing law is the National Internal Revenue Code (NIRC) as amended by R.A. No. 10963, known as the Tax Reform for Acceleration and Inclusion (TRAIN) Law. However, when it comes to local business taxes, the general governing law is the Local Government Code (LGC) and the respective tax ordinances of each LGU.
In this article, I will present the remedies taxpayers may avail of in any city, municipality or province as far as local business taxes are concerned as provided by the LGC.
SECTION 194. Periods of Assessment and Collection.— (a) Local taxes, fees, or charges shall be assessed within five(5) years from the date they become due. No action for the collection of such taxes, fees, or charges, whether administrative or judicial, shall be instituted after the expiration of such period: Provided, That taxes, fees, or charges which have accrued before the effectivity of this Code may be assessed within a period of three (3) years from the date they become due.
(b) In case of fraud or intent to evade the payment of taxes, fees or charges, the same may be assessed within ten (10) years from discovery of the fraud or intent to evade payment.
(c) Local taxes, fees, or charges may be collected within five (5) years from the date of assessment by administrative or judicial action. No such action shall be instituted after the expiration of the said period: Provided, however, That, taxes, fees or charges assessed before the effectivity of this Code may be collected within a period of three (3) years from the date of assessment.
(d) The running of the periods of prescription provided in the preceding paragraphs shall be suspended for the time during which:
1) The treasurer is legally prevented from making the assessment or collection;
2) The taxpayer requests for a reinvestigation and executes a waiver in writing before the expiration of the period within which to assess or collect; and
3) The taxpayer is out of the country or otherwise cannot be located.
Generally, local taxes, fees and charges must be assessed within 5 years from the date they become due. However, the rule admits of two exceptions in that (1) if the taxes, fees or charges accrued before the effectivity of the LGC, they may be assessed within 3 years from the date they became due and (2) in case of fraud or intent to evade the payment of taxes, fees or charges, the assessment may be made within the allowable period of 10 years from the discovery of the fraud.
For purposes of this Section, it should be remembered that under Section 166 of the LGC, all local taxes, fees and charges accrue on the first day of January of each year unless otherwise provided for in the LGC and except in the case of new taxes, fees or charges, or changes in the rates thereof, which accrue on the first day of the quarter next following the effectivity of the ordinance imposing such new levies or rates.
As to collection of the local taxes, fees or charges, note that the required waiver in paragraph (d)(2) must not only be in writing but must also be executed before the expiration of the period within which to assess or collect.
SECTION 195. Protest of Assessment.—When the local treasurer or his duly authorized representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and penalties. Within sixty (60) days from receipt of the notice of assessment, the taxpayer may file a written protest with the local treasurer contesting the assessment; otherwise, the assessment shall become final and executory. The local treasurer shall decide the protest within sixty (60) days from the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a notice cancelling wholly or partly the assessment. However, if the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with notice to the taxpayer. The taxpayer shall have thirty (30) days from the receipt of the denial of the protest or from the lapse of the sixty-day period prescribe herein within which to appeal with the court of competent jurisdiction; otherwise, the assessment becomes conclusive and unappealable.
An assessment fixes and determines the tax liability of a taxpayer. It is a notice to the effect that the amount therein stated is due as tax and demand for payment thereof (Manila Electric Company v. Barlis; G.R. No. 114231; June 29, 2004). The notice of assessment, which stands as the first instance the taxpayer is officially made aware of the pending tax liability, should be sufficiently informative to apprise the taxpayer of the legal basis of the tax. Section 195 of the LGC does not go as far as to expressly require that the notice of assessment specifically cite the provision of the ordinance involved but it does require that it states the nature of the tax, fee or charge, the amount of deficiency, surcharges, interests and penalties (Yamane v. BA Lepanto Condominium Corporation; G.R. No. 154993; October 25, 2005).
Indeed, Section 195 does not specify the grounds with which a protest may be made. Nevertheless, the law requires that in case of non-payment of correct taxes, fee, and charges, the notice of assessment given to the taxpayer must state the nature of the tax, fee or charge, the amount of deficiency, surcharges, interests and penalties therefor. Hence, the fundamental ground upon which a protest may lie is that the assessment may not have factual basis, that it is contrary to the facts or that the taxpayer is not liable to pay the tax being exempted from it or not covered by it.
It should be emphasized that the filing of a protest with the local treasurer is a condition precedent before resort to the courts can be had. Popularly known as the doctrine of exhaustion of administrative remedies, the rule is that where the law provides for the remedies against the action of an administrative board, body or officer, relief to courts can be sought only after exhausting all remedies provided. The reason rests upon the presumption that the administrative body, if given the chance to correct its mistake or error, may amend its decision on a given matter and decide it properly. Therefore, where a remedy is available within the administrative machinery, this should be resorted to before resort can be made to the courts, not only to give the administrative agency the opportunity to decide the matter correctly, but also to prevent unnecessary and premature resort to the courts (Lopez v. City of Manila; G.R. No. 127139; June 29, 2004).
The court of competent jurisdiction referred to in Section 195 is the Regional Trial Court which exercises original jurisdiction in the issuance of writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction which may be enforced in any part of their respective regions.
Specifically, certiorari is a special civil action against a tribunal, board, or officer exercising judicial or quasi-judicial function which is alleged in a verified petition filed by an aggrieved party to have acted without jurisdiction or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, praying that judgment be rendered annulling or modifying the proceedings of such tribunal, board, or officer, and granting such incidental reliefs as law and justice may require (Section 1, Rule 65, 1997 Rules of Civil Procedure).
It should be pointed out that the jurisdiction exercised by the Regional Trial Court in deciding an appeal taken from a denial of a protest by the local treasurer is original in character as distinguished from an exercise of the court’s appellate jurisdiction. This should be emphasized despite the language of Section 195 which states that the remedy of the taxpayer whose protest is denied is to “appeal with the court of competent jurisdiction.”
Original jurisdiction is the power of the court to take judicial cognizance of a case instituted for judicial action for the first time under conditions provided by law. On the other hand, appellate jurisdiction is the authority of a court higher in rank to re-examine the final order or judgment of a lower court which tried the case now elevated for judicial review. With these definitions in mind, reviews taken by the RTC over denials of protests by the local treasurer would fall within the court’s original jurisdiction. Moreover, labeling these reviews as an exercise of appellate jurisdiction is inappropriate because the denial of the protest is not a judgment or order of a lower court, but of a local government official.
With the enactment of R.A. 9282 expanding the jurisdiction of the Court of Tax Appeals (CTA), the law has made it clear that the CTA now exercises exclusive appellate jurisdiction to review on appeal decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction (Section 7(a)(3), R.A. No. 9282).
SECTION 196. Claim for Refund or Tax Credit.—No case or proceeding shall be maintained in any court for the recovery of any tax, fee or charge erroneously or illegally collected until a written claim for refund or credit has been filed with the local treasurer. No case or proceeding shall be entertained in any court after the expiration of two (2) years from the date the taxpayer is entitled to a refund or credit.
The doctrine of supervening cause applies to refunds of local taxes. In view of the language of Section 196, it would seem that the two-year period may be suspended by a supervening cause. An example of a supervening cause is the subsequent exemption of the taxpayer from which date the taxpayer is entitled to a refund or credit. Contrast this to the words of Section 229 of the NIRC wherein the two-year period cannot be suspended by any supervening cause, to wit:
“In any case, no suit or proceeding shall be filed after the expiration of the two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid.”
There has been a lot of confusion among entrepreneurs, business managers and self-employed professionals with regard to the value-added tax (VAT). As Philippine-based income-earners on the “S” and “B” quadrants of the Cashflow Quadrant® conceptualized by world-renowned personal finance adviser Robert Kiyosaki, it is imperative for us to know the subtle nuances of the VAT regime. Being familiar with these concepts will help us avoid unnecessary expenses due to overpayment—or underpayment—of taxes. Remember, non-payment or underpayment shall also result in penalties and surcharges that may be slapped by the taxing authority on erring taxpayers.
So, how does a VAT-registered seller of goods or services know whether or not to pass on its VAT burden to its customers or clients? What if certain clients claim that we should not pass on to them the VAT burden because of their being VAT-exempt or VAT Zero-Rated? What are their differences and should they be treated?
Pursuant to Section 106 of the National Internal Revenue Code, a.k.a. the Tax Code, VAT is imposed on the gross selling price of the goods or services provided by the VAT-registered seller. It goes on further to define the term ‘gross selling price’, thus—
“The term ‘gross selling price’ means the total amount of money or its equivalent which the purchaser pays or is obligated to pay to the seller in consideration of the sale, barter or exchange of the goods or properties, excluding the value-added tax. The excise tax, if any, on such goods or properties shall form part of the gross selling price.”
On the other hand, Section 108 of the NIRC defines the phrase ‘sale or exchange of services’, thus—
“The phrase ‘sale or exchange of services’ means the performance of all kinds or services in the Philippines for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors; stock, real estate, commercial, customs and immigration brokers; lessors of property, whether personal or real; warehousing services; lessors or distributors of cinematographic films; persons engaged in milling processing, manufacturing or repacking goods for others; proprietors, operators or keepers of hotels, motels, resthouses, pension houses, inns, resorts; proprietors or operators of restaurants, refreshment parlors, cafes and other eating places, including clubs and caterers; dealers in securities; lending investors; transportation contractors on their transport of goods or cargoes, including persons who transport goods or cargoes for hire another domestic common carriers by land, air and water relative to their transport of goods or cargoes; services of franchise grantees of telephone and telegraph, radio and television broadcasting and all other franchise grantees except those under Section 119 of this Code; services of banks, non-bank financial intermediaries and finance companies; and non-life insurance companies (except their crop insurances), including surety, fidelity, indemnity and bonding companies; and similar services regardless of whether or not the performance thereof calls for the exercise or use of the physical or mental faculties. The phrase ‘sale or exchange of services’ shall likewise include:
(1) The lease or the use of or the right or privilege to use any copyright, patent, design or model, plan secret formula or process, goodwill, trademark, trade brand or other like property or right;
(2) The lease of the use of, or the right to use of any industrial, commercial or scientific equipment;
(3) The supply of scientific, technical, industrial or commercial knowledge or information;
(4) The supply of any assistance that is ancillary and subsidiary to and is furnished as a means of enabling the application or enjoyment of any such property, or right as is mentioned in subparagraph (2) or any such knowledge or information as is mentioned in subparagraph (3);
(5) The supply of services by a nonresident person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any brand, machinery or other apparatus purchased from such nonresident person.
(6) The supply of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme;
(7) The lease of motion picture films, films, tapes and discs; and
(8) The lease or the use of or the right to use radio, television, satellite transmission and cable television time.
Lease of properties shall be subject to the tax herein imposed irrespective of the place where the contract of lease or licensing agreement was executed if the property is leased or used in the Philippines.
The term “gross receipts” means the total amount of money or its equivalent representing the contract price, compensation, service fee, rental or royalty, including the amount charged for materials supplied with the services and deposits and advanced payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person, excluding value-added tax.”
For VAT-exempt or non-VAT purchasers, Revenue Regulations 12-2003 provides:
“SECTION 4. Treatment of the Output Tax Shifted to the Buyer of Services. – In general, the payor of the income/fee who is a VAT-registered person shall be entitled to claim the output tax paid by the financial institution as an input tax credit. On the other hand, if the payor is not a VAT-registered person, the VAT passed on by the payee shall form part of his cost. Provided, that a VAT receipt/invoice shall be issued by the payee for all the compensation for services received which shall be used as the evidence for the claim of input tax.” (underscoring mine)
For the tax (VAT) treatment of the sale, barter or exchange of goods or sale or exchange of services or lease of properties made by suppliers from the customs territory to the registered Freeport Zone enterprises in the Subic Freeport Zone (SFZ), including the Clark Freeport Zone (CFZ), as well as the Poro Point Freeport Zone (PPFZ), and vice versa pursuant to the provisions of Sections 12 and 15 of Republic Act (RA) No. 7227, as amended by RA 9400, in relation to Sections 106(A)(2)(c) and 108(B)(3) of the Tax Code of 1997, as amended by RA 9337, and implemented by Sections 5, 6, 12, and 13 of Revenue Regulations (RR) No. 4-07 amending Sections 4.106-5, 4.106-6, and 4.108-6 of RR 16-2005, Revenue Memorandum Circular 50-2007 provides a Q&A guide, to wit:
Q1: How will the sale, barter or exchange of goods or properties into the Freeport Zone by suppliers/contractors from the Customs Territory be considered?
A1: Such transactions shall be considered as export sales in accordance with RA 7227, as amended by RA 9400, which provides that the Freeport Zones shall be operated and managed as a separate customs territory. Moreover, Executive Order (EO) No. 226 provides that sales from the Customs Territory to export processing zones are considered as “export sales”.
Q2: What will be the treatment of sale, barter, exchange or lease of goods, properties and sale or exchange of services to a registered Freeport Zone enterprise by sellers/contractors from the Customs Territory?
A2: If the seller is a VAT taxpayer, such sale, barter or exchange shall be subject to VAT at zero (0%) percent. If the seller is a non -VAT taxpayer, the transaction shall be exempt from VAT.
Q3: What is meant by a “zero-rated” sale and an “exempt” sale?
A3: A zero-rated sale of goods, properties and/or services (by a VAT-registered person) is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of goods, properties or services, related to such zero-rated sale, shall be available as tax credit or refund in accordance with existing regulations. Under this type of sale, no VAT shall be shifted or passed-on by VAT-registered sellers/suppliers from the Customs Territory on their sale, barter or exchange of goods, properties or services to the subject registered Freeport Zone enterprises.
A VAT-exempt transaction, on the other hand, refers to the sale of goods, properties or services or the use or lease of properties that is not subject to VAT (output tax) under Section 109 of the Tax Code of 1997, and the seller/supplier is not allowed any tax credit of VAT (input tax) on purchases related to such exempt transaction.
Q4: What is the difference between an automatically zero-rated sale and an effectively zero-rated sale?
A4: An automatically zero-rated sale refers to a sale of goods, properties and services to a Freeport Zone-registered enterprise by a VAT-registered seller/supplier that is regarded as either an export sale or a foreign currency denominated sale under Section 106 of the Tax Code of 1997. An effectively zero-rated sale, on the other hand, refers to the local sale of goods, properties and services by a VAT-registered person to an entity that was granted indirect tax exemption under special laws or international agreements. Since the buyer is exempt from indirect tax, the seller cannot pass on the VAT and therefore, the exemption enjoyed by the buyer shall extend to the seller, making the sale effectively zero-rated.
Q5: What is the coverage of VAT zero-rating?
A5: The zero-rating will cover sale, barter, exchange or lease of all goods, properties and/or services by a VAT-registered seller/contractor from the Customs Territory to a Freeport Zone-registered enterprise and shall include, among others, the following:
- The sale/supply of ordinary cars, vehicles, automobiles, specialized vehicles or other transportation equipment, provided that these are used exclusively within the subject special Freeport Zones;
- The lease of properties by VAT-registered lessors, provided that such properties are located within the subject Freeport Zones;
- The sale/supply of electricity by the National Power Corporation (“NPC”) or by any other VAT-registered seller/supplier from the Customs Territory, to any registered Freeport Zone enterprise engaged in the distribution of power or electricity within the subject Freeport Zones; and
- The sale/supply of services, provided such services are rendered or performed within the Freeport Zone.
Q6: Since the Freeport Zones are considered as foreign soil and therefore, a separate tax jurisdiction, what is the VAT treatment of sale, exchange, barter or lease of goods, properties and/or services by a Freeport Zone-registered enterprise or Resident within the Freeport Zone?
A6: Such sale, exchange, barter or lease of goods, properties and services within the subject Freeport Zones shall be exempt from VAT. The following transactions are covered under this exemption:
- All transactions between and/or among two registered Freeport Zone Enterprises or Residents;
- Consumer goods purchased and consumed within the Freeport Zones;
- Sale/supply of services, including power or electricity, by a Freeport Zone-registered enterprise or resident within the Freeport Zone, regardless of whether or not the buyer or customer is a registered Freeport Zone enterprise or Zone Resident, provided that said power/electricity or services are rendered, used or consumed within the Freeport Zone ; and
- The lease of properties owned by Freeport Zone-registered enterprises or Residents, provided that such properties are located within the subject Freeport Zones.
Q7: What is the tax treatment for the income of Freeport Zone-registered enterprises derived from sources in the Customs Territory?
A7: Freeport Zone-registered enterprises may generate income from sources within the Customs Territory of up to thirty percent (30%) of its total income from all sources; provided, that should a Freeport Zone-registered enterprise’s income from sources within the Customs Territory exceed
thirty percent (30%) of its total income from all sources, then it shall be subject to the income tax laws of the Customs Territory; provided further, that in any case, customs duties and taxes must be paid with respect to transactions, receipts, income and sales of articles to the Customs Territory and in the Customs Territory.
Q8: What is the tax treatment of sale, barter or exchange of goods and properties by Freeport Zone-registered enterprises to a buyer from the customs territory? (i.e. from the Freeport Zone into the Customs Territory)
A8: The sale, barter or exchange shall be treated as a technical importation made by the buyer in the customs territory. The buyer shall be treated as the importer and shall be imposed the corresponding import taxes and duties prior to release of the goods or merchandise from Customs custody. Any unpaid taxes thereon, aside from being the prime liability of the buyer-importer, shall constitute a lien on such goods or merchandise imported from the Freeport Zone.
Q9: What is the tax treatment of a sale of service or lease of properties (machineries and equipment) by Freeport Zone-registered enterprises to a customer or lessee from the Customs Territory?
A9: The sale of service shall be exempt from VAT if the service is performed or rendered within the Freeport Zone. The lease of properties, on the other hand, shall likewise be exempt from VAT if the property is located within the Freeport Zone. However, if the properties (machineries and equipment) leased by the Freeport Zone registered enterprise is located outside of the Freeport Zone, payments to such enterprise will be considered as royalties and subject to the final withholding VAT of 12%.
Q10: What are the documentary requirements to be submitted by Freeport Zone-registered enterprises to the BIR to be entitled to the tax benefits clarified in this Circular?
A10: 1. Certificate of Registration and Tax Exemption as a Freeport Zone registered Enterprise;
- Copies of relevant documentation of the legal status of the business enterprise (Articles of Incorporation, Partnership Agreement, SEC Registration and similar documents) showing, among others, beneficial ownership;
- If a corporation, partnership or other business enterprise is organized or constituted outside the Philippines, the name, address of the legal agent of the enterprise in the Freeport Zone accompanied by sworn proof of consent of the agent to serve as such;
- Evidence of the physical location of the business enterprise within the Freeport Zone, such as certificate of title, tax declaration, property deed, lease agreement and similar documents;
- If previously part of a larger business enterprise doing business elsewhere in the Philippines, evidence of restructuring to exclude all business operations taking place inside the boundaries of the Freeport Zone; and that the unit left to operate inside the Freeport Zone is organized as a separate legal entity.
- List of assets comprising the investment to be made; and
- Such other documents as the BIR may require.
Please take note that services performed by service providers outside the Freeport/Economic zones are VATable pursuant to the above-quoted RMC. In addition, please remember that VAT-exempt transactions, which are covered by Section 109 of the NIRC is different from VAT Zero-rated and are thus governed by different rules as can be seen from above.
Knowing these rules will help you avoid unnecessary headaches and heartaches brought about by stressful BIR tax audit assessments. Remember, “ignorance of the law excuses no one from compliance therewith” (Article 3, Civil Code).
When it comes to investing in the stock market, financial and investment advisers will always caution potential investors that before they place their hard-earned money therein, they should first be all-SET. This means that they should have the Size of funds, Expertise and Time. However, even though a potential stock market investor may not be all-SET, there is still an alternative paper asset that one can invest in — Mutual Funds. Below are the advantages of investing in mutual funds according to the Philippine Investment Funds Association (PIFA) and the Securities and Exchange Commission (SEC) along with my additional comments:
1. Professional Management
One of the main attractions of mutual funds is that it affords its investors, particularly the small ones, the services of full-time professional managers whose job is to analyze the various investment products available in the market and select those that would give the best possible returns to the fund and its shareholders.
2. Low Capital Requirement
Direct investments usually require substantial capital. The minimum investment amounts for Treasury Bills and Commercial paper, for instance, range from P100,000 to P1,000,000 depending on the bank or investment house you are dealing with. This also holds true for stock because while you may be able to buy one “lot” (shares are sold in board lots ranging from 10 shares to 1 million shares depending on the price at which these shares are traded) for as low as P1,000 or P5,000, you may not be able to buy the stock that you really want, especially the blue chip and growth stocks.
There is a saying that goes, “Do not put all your eggs in one basket.” This adage is especially true in the world of investments which is full of uncertainties. In fact, even King Solomon, the wisest king who has ever lived, said, “But divide your investments among many places, for you do not know what risks might lie ahead (Ecclesiastes 11:2, NLT). There is no such thing as a “sure” thing. An important investment principle that requires holding several securities to reduce the risks associated with investing in individual securities is called diversification. When you invest in a mutual fund, you achieve instant diversification because the fund is required by law to be invested in a wide array of issues and/or securities.
Liquidity is the ability to readily convert investments into cash. Other investment products require you to find buyer so that you can liquidate your investments. That is not the case with mutual fund shares because the fund itself stands ready to buy back these shares at the prevailing Net Asset Value Per Share. While the law provides that redemption proceeds must be given within seven (7) banking days from the date of the redemption request, most funds are able to pay the redemption proceeds within the next day. Mutual Funds are, therefore, considered very liquid investments.
Safety is a very important consideration for most investors. Mutual funds are highly regulated by the Securities and Exchange Commission under the Investment Company Act and its Implementing Rules and Regulations. Mutual funds are prohibited from investing in particular investment products and engaging in certain transactions. They also have to submit regular reports to the SEC as well as to their shareholders.
6. Potentially Higher Returns
Because a mutual fund is managed as a single portfolio, it is able to take advantage of certain economies of scale. For instance, with its millions of pesos (or other currency) under management, it can negotiate for lower stockbrokerage fees or higher interest rates on fixed-income instruments. In the end, however, it is still the investment company adviser who really makes the big difference when an individual is faced with this decision — “Will I make direct investments by myself or will I invest in a mutual fund?” Because very few individual investors can match the experience and skill of full-time professional fund managers, the investing public is well advised to invest in a mutual fund instead.
Mutual funds are purchased directly through SEC-licensed Certified Investment Solicitors (CIS) only. These CIS are usually connected to banks, insurance companies, investment companies, or brokerage firms and normally provide personal, tailor-fit service. Some fund companies have even set up retail centers for investors. Many have payroll deduction plans and some funds, with proper authorization, will deduct and invest on a regular basis a specified amount from the shareholder’s bank account.
Funds offer a variety of services, including preparing monthly or quarterly account statements, automatically debiting additional investments from, or crediting redemption proceeds to, the investors’ bank account; or allowing transfers from one fund to another. Most major mutual fund companies offer extensive record-keeping services to help investors track their transactions and follow their funds’ performance via phone, text message, or the internet.
Investment company advisers (such as Philam Asset Management, Inc.) provide investors with updated information pertaining to the fund. All material facts are disclosed to investors as required by the SEC.
Investors are allowed to modify investment strategies over time by transferring or moving from one fund to another within a mutual fund family.
Pastoral Counseling is not a lecture but a process. As students, this has been pounded to us over and over again. The tendency to monologue during counseling sessions for those in the teaching and preaching ministry are very high. However, as discussed in my previous articles, it is also by those in the said ministry that pastoral or nouthetic counseling are best conducted because it is to them that God has entrusted the spiritual, psychological, and sometimes, even physiological care of His flock. So what exactly is this process?
Obviously, the very first stage of counseling is making the contact. These contacts are not only limited to the formal arrangements made by the parishioner or client with the counselor but also during informal settings, including what Dr. Harold Sala in his Counseling Friends in Need, refers to as “peer counseling.” These informal meetings often occur during social gatherings such as parties, family reunions, funerals, weddings, parent-teacher associations, and the like. That is why, according to Dr. Wayne Oates in his An Introduction to Pastoral Counseling, “The pastor and other religious workers, therefore, can never become so professional in their pictures of themselves that they underestimate the importance of informal relationships both as powerful ministries in and of themselves and as points of vital contact for beginning more formal counseling relationships.”
Aside from informal settings, the initial contact may also be in the form of formal pastoral visitation and counseling. In smaller congregations such as community or house churches, pastoral house visitation of parishioners are quite common. However, as far as megachurches are concerned, this practice seems highly impractical if not altogether humanly impossible unless the pastoral complement of the church is large enough to cover each and every household in their membership. To alleviate this, house visitations are usually delegated to the deacons or discipleship group leaders who have a more personal and intimate relationship with their respective group members. Nevertheless, pastoral visits, whether done by the pastor himself or other church leaders gives the ministers a opportunity to know their flock better. This enables them to effectively assess their members’ current situation in life such as their economic status, vocational issues, and interfamily tensions, which in turn helps them in counseling their people when the need arises.
On the side of the parishioners, pastoral visits give them a sense of value and belonging to the local church they are members of. Such feeling aids them in their ability to perceive their minister as someone who truly cares for them thus making it easier for them to open up their problems for counseling. Finally, pastoral visiting helps establish that relationship of rapport, of confidence and affection, between counselor and client without which the entire procedure is impossible.
As with most, if not all professions, pastoral counseling as a profession also has its own ethical standards. Ethical standards are essential to all kinds of professions, especially to those which particularly deal directly with confidential information such as counseling. This is why as with lawyers and physicians who are involved in legal and medical counseling respectively, information gathered through the practice of their professions are considered privileged and hence cannot be legally forced out of the professional except for specific valid reasons as determined by law and the courts of justice.
The confidential treatment of all personal information is first and foremost the backbone of any of the counseling professions and this is no less true for the ministry of pastoral counseling. People come to professional counselors because they trust that the counselor, being a licensed professional or ordained minister, would handle their personal information in strict confidentiality. Otherwise, potential clients will become afraid to share their deepest and darkest secrets, which are usually the cause of their problems, to the counselor. According to Dr. Narramore in his authoritative book, The Psychology of Counseling, the counselee wants understanding, sympathy and respect for the seriousness of his or her situation. Although there are several other areas of ethical concern in counseling, the manner of handling confidential information, both verbal and written, is of utmost importance. To stress the gravity of this, let me give an example from my own job as a project attorney at Integreon, a knowledge process outsourcing company. In our office, we have what they call service delivery centers where we actually perform our work, which is to review, sort, and tag thousands of documents for use as evidence in litigation. In order to protect the confidentiality of the sensitive documents that come our way, we are not allowed to bring inside the delivery center any mobile phone, data storage device or even pieces of paper unless we shred it on our way out.
Another important area of ethical concern for pastoral counselors and ordained ministers is propriety in dealing with counselees of the opposite sex, especially if one or both of them are married. This involves conducting the counseling session in an appropriate place, limiting physical contact to the shaking of hands, and avoiding emotional attachment and dependency brought about by probing for unnecessary intimate details. To be sure, it is well to keep in mind that when your own personal desires are unsatisfied, it is easy to be unconsciously seductive toward another person.
Lastly, a counselor should recognize his limitations and learn to refer to other professionals, such as physicians or lawyers who may be more competent to handle his client’s medical or legal problems.
As with all new lawyers, after I took my oath and signed the Roll of Attorneys, thereby becoming a full-fledged licensed counselor and attorney-at-law, I was so excited to begin my practice. However, little did I know that law school did not prepare me to do so! Yes, I knew the law, both substantive and procedural, but I knew nothing about the professional or “business” aspect of building my own law office. I realized that I did not know how to properly set up and conduct an interview with a prospective client and worse, I had no idea how much to charge for my services! I was so dumbfounded that I just tried calling up older and more experienced lawyers to ask them for some advice. The only thing was, there were almost as many different methods and styles as there are law practitioners. During that time, and even now after six years of law practice, I really wished that all law schools would include in their curriculum a subject on “How to Set Up and Manage a Law Office.”
Likewise, the same thing is true with regard to the practice or ministry of pastoral counseling. Fortunately for me, I am now learning in seminary the things that I should have learned in law school, particularly, how to arrange and conduct an effective client interview. According to Dr. Clyde Narramore, a renowned clinical psychologist and counselor, effective counselors are conscious of details and thus give careful thought to such arrangements as: (a) setting the appointment; (b) preparing the interview; (c) beginning the interview; (d) determining the length of the interview; (e) closing the interview; (f) recording the interview; and (g) handling persistent cases. In his seminal book, The Psychology of Counseling, he provides basic guidelines therefor. He further stressed that counseling is different from a lecture or seminar where one person merely passes on information to other people because in counseling, both the counselor and the counselee undergo a process which doesn’t necessarily end after one session.
Dr, Narramore also discussed the need for counselors to give their best attention to their clients taking into account not only the latter’s words but also their demeanor in order for the former to adequately assess and analyze the latter’s problems and hence, provide effective solutions. That is why in setting an appointment, possible distractions must be minimized if not totally eliminated so that not even the minutest detail can escape the attention of the counselor. Lastly, Dr. Narramore stressed the value of discussion. He said that contrary to popular belief that “talk is cheap,” talking actually helps a person think clearly by putting into words the concepts he has in mind. In doing so, good ideas are sifted from bad ones. It helps us define just what we really do think. It shows up the true issue and points out possible danger or good.
Due to their similarities, the lessons I am currently learning about pastoral counseling can also readily be applied to legal counseling. Observing these basic steps will certainly make one a good counselor, whether pastoral or legal.
Before Jesus Christ ascended into heaven, He promised His disciples that He would not leave them orphans but would send them another Paraclete Whom He identified as the Spirit of truth (John 14:16-17). In English translations of the Bible, the Greek word ‘Paraclete’ in the above-cited passage is rendered either as ‘Advocate’ or ‘Helper.’ In addition to those however, the most appropriate translation of that word in the context of our topic is that of ‘Counselor.’ Although Jesus was and is definitely the Great Counselor while He walked the earth, the Counselor who remained on earth to guide Jesus’ disciples is the Holy Spirit. Jesus said that the Holy Spirit will remind His disciples everything that He taught them—and that includes us modern-day Christians.
In referring to the third Person of the triune God, the word ‘holy’ is most commonly used. According to Jay Adams, the Holy Spirit is called holy not only because He is to be distinguished from all other spirits, and in particular from unclean spirits, but also because He is the Source of all holiness. He further states that “the holiness of God’s people that results from their sanctification by the Holy Spirit must be attributed entirely to Him as He works through His Word.
As pastors and nouthetic counselors entrusted by Jesus to take care and watch over His flock (Acts 20:28), we are to trust in the Lord with all our hearts and lean not on our own understanding. We should acknowledge Him in all our ways and He will make our paths straight (Proverbs 3:5-6). Instead of relying on human wisdom as set forth in the various philosophical systems of the world, it is only through the help of the Holy Spirit and by our reliance on the truth of God’s Word in Sacred Scripture that we can truly be effective in guiding His people out of the problems they are facing. By being faithful to God’s calling and direction, we bring glory to His name.
Pastoral counseling, as its name implies, happens in the context of the church. As the pastor is the person primarily responsible for the job, his role as the leader of the flock Christ has entrusted to him is indispensable to his duty as counselor. The pastor’s knowledge of of the conduct in the church of the people under his care provides clues to a deeper understanding of their psychological and spiritual condition.
According to Samuel Southard, “One of the characteristics of the Christian church is its ability to demonstrate God’s love through human relationships. In the Christian fellowship a believer may find tangible expression of the supernatural grace that endows his life.” He further stated that the standard for the Christian’s life among men is the relationship which exists between Christ and his disciples in such a way that to walk worthy of God’s calling is to forebear one another in love and walk honorably among men. Most importantly, the church is not to be defined just in terms of relationships among men but in terms of the quality of the relationship that exists among men because they have become sons of God. The church provides a purpose for living and the fellowship through which love may be made real.
The setting and atmosphere of the church is the best condition to facilitate the effectiveness of the counseling ministry. This includes the relationship between the pastor and his flock and the flock among themselves. In fact, whenever I tell my wife that we should go and seek counseling, she would always tell me that she wants someone whom we can trust. The adage, “People don’t care how much you know until they know how much you care” is absolutely true when it comes to counseling. Most people, especially Filipinos, will not listen to some stranger telling them how to run their lives. Instead of looking at the educational and professional attainments of the counselor—no matter how important that is—they will need someone who they trust. Someone whom they will entrust with their deepest secrets and innermost turmoils. And what better place to look for aside from one’s biological family than one’s spiritual family?