US bailout 5 years ago avoided catastrophe - Treasury

WASHINGTON - The US Treasury said Wednesday the government's massive response to the economic crisis five years ago paid off, avoiding a catastrophic breakdown of the financial system.

In a report marking the anniversary of the bankruptcy of investment bank Lehman Brothers -- which snowballed into the worst crisis since the 1930s -- the Treasury defended deploying hundreds of billions of taxpayer dollars to save other banks, major financial institutions and auto companies.

"Without the government's forceful response, that damage would have been far worse, and the ultimate cost to repair the damage would have been far higher," the report summarized.

While the rescue effort required piling up government debt, it was necessary, said Treasury officials who briefed reporters.

"We prevented a collapse of the financial system," one said on condition of anonymity.

"That's why we did it, and that's the measure of success."

The report says the government recovered what it spent -- or even turned a profit -- in the Troubled Asset Relief Program and the bailouts of housing agencies Fannie Mae and Freddie Mac, both efforts launched late 2008 by the outgoing administration of president George W. Bush.

Of $238 billion pumped into more than 700 vulnerable banks, only $3 billion has yet to be paid back.

From $182 billion allocated to rescue the giant insurer American international Group, the government counts $205 billion in returns, though that includes $17 billion in paper gains still not realized.

In the huge operations to save General Motors and Chrysler from bankruptcy, the government put up $80 billion.

It has since sold Chrysler to Italy's Fiat, and General Motors is back to health, selling cars at pre-crisis levels and relisted on the US stock market.

Even so, the auto sector rescue is likely to come up $15 billion short, the Treasury admitted.

The largest chunk of money went to Fannie and Freddie, whose survival was crucial in turning around the housing sector after it imploded when the recession left millions of Americans unable to pay their mortgages.

The government pumped $187 billion into the two, taking control of them after shareholders were wiped out.

While none of the equity has been recovered, the government has taken $146 billion in dividend payments from them and expects more in the future, the official said.

The downside is a government deficit that rocketed to $1.4 trillion in fiscal 2009 and continued to top $1 trillion until this year. That sent government debt to the current nearly $17 trillion, compared to just $10 trillion five years ago.

Critics of the government say that is why the bailouts were wrong, arguing that taxpayers will continue to bear the cost for years into the future.

But the Treasury officials said keeping the economy together and, especially, keeping the tens of thousands of auto company workers in their jobs were worth the costs.

People "do not really understand what we did," said another Treasury official.

"The run was stopped, the panic was stopped, the system didn't collapse."

"The ripple effects of letting those companies implode would have been huge."

source: interaksyon.com

Debt servicing declines at end-February

MANILA - Taxpayers' money spent to settle the country's debt fell by more than a tenth in the first two months of the year, the Bureau of Treasury said on Monday.

Data from the bureau showed the national government having spent P174.34 billion at end-February on debt amortization and interest. This is 10.7 percent lower than the P195.14 billion spent in the same two-month period last year.

The drop in the government's overall debt servicing was in spite a 2.7 percent increase in interest payments to P72.26 billion this year from P70.85 billion last year. In contrast, the amount spent on paying down the principal debt dropped 18.2 percent to P101.58 billion this year from P124.29 billion in 2012.

In February alone, debt servicing climbed to P62.616 billion this year from P60.439 billion last year. Of the amount spent for debt servicing, P44.696 billion went to amortization and P17.92 billion to interest.

As of January, the government owed P5.334 trillion, or seven percent more than a year ago's P4.993 trillion.

The government incurs debt whenever its tax revenues fall short of its expenditures, creating what is called a budget deficit.

The Aquino administration earlier said it would limit its borrowings this year to the domestic market so it can tap into the country's excess liquidity and so borrow at lower rates.

Treasury rates have slumped to record lows on account of too much money in the local financial system. Treasury bill rates for example have slumped to below one percent.

source: interaksyon.com

Makati extends works hours ahead of deadline for tax, business license payments

MANILA - Frontline offices of the Makati City government have extended work hours on weekdays and weekends to accommodate taxpayers before the January 20 deadline for tax payments and renewal of business licenses.

In a statement, Makati Mayor Jejomar Erwin S. Binay said business owners and real property taxpayers can come to City Hall on weekdays after 5 p.m. and on weekends for their transactions to avail of discounts and avoid penalties for late payments.

The mayor also announced that electronic realty tax payment centers in the barangays will be open on designated dates, during which property owners need only present their previous receipt to complete their transaction in four minutes.

Binay said Makati offers a 10 percent discount on realty taxes paid on an annual basis, and five percent for quarterly payments made during the first 20 days of the quarter.

The Business Permits Office and Real Property Tax Division of Makati, assisted by teams from the Office of the City Administrator, Urban Development Department, Miscellaneous Division and the barangays, will be open from 5:30-10 p.m. from Mondays-Fridays until January 18.

On weekends, the said offices will be open to serve clients from 8 a.m. to 8 p.m., specifically on January 12 and 13, and January 19 and 20.  The issuance of community tax certificates, barangay clearances, insurance and other transactions are being done at the new City Hall Parking Building along F. Zobel St. on weekdays and weekends.

Satellite tax payment centers will be open from 9 a.m. to 4 p.m. in the following barangays: Urdaneta, January 10; Magallanes, January 11 and 12; San Lorenzo, January 14; Bangkal and Pio del Pilar, January 15; Tejeros and San Antonio, January 16; Guadalupe Nuevo and East Rembo, January 17; and West Rembo, January 18.

Residents whose barangays are not yet included in the program may pay their taxes at the nearest available barangay tax payment center or at the second floor of the new building of the Makati City Hall.

Based on the Makati Revenue Code, annual realty tax payments made after March will be charged an eight percent penalty, while late quarterly payments will incur a penalty of two percent per month.

Penalties on late payments of business taxes include a 25 percent surcharge and a two percent penalty per month of delay until the amount due is fully settled.

source: interaksyon.com

BIR Begins Probe Into ITRs

MANILA, Philippines - The Bureau of Internal Revenue (BIR) starts today its nationwide investigation of 2011 income tax returns (ITRs) filed by individuals and corporations last April.

Revenue Commissioner Kim S. Jacinto-Henares instructed tax collectors to continue their audit work to meet their individual collection assignments for the year.

The BIR chief issued the instruction over the weekend before flying to Spain to attend the two-day meeting of the Organization for Economic Cooperation and Development (OECD) for tax administrators of member countries.

Revenue regional directors and heads of various divisions of the Large Taxpayers Service (LTS) were reluctant to open the 2011 ITRs for audit purposes.

They are waiting for the issuance of the so-called Annual Audit Program (AAP) by the top management, a practice adopted previously before an investigation can commence.

Henares said no such guideline will be issued for the year and tax examiners should continue what they have been doing for the BIR generate more funds to support President Aquino's social and economic development programs.

She said taxpayers with deficiency taxes should be required to pay additional amounts and those who deliberately falsified their tax records should be ferreted out so that they can be included in the Run-After-Tax-Evaders (RATE).

The BIR has experienced difficulties in meeting its collection targets for first four months of the year but the take was substantially higher than the actual collection for the same period last year raising P345.5 billion.

Higher fiscal authorities fixed the BIR collection goal for the year at P1.066 trillion.

source: mb.com.ph