Critical Analysis on Philippine Practices on Trade, Cash Discounts, Payroll and Online Banking

GROUP 5

I.

DEFINITION OF TERMS

Trade Discount Deduction in price given by the wholesaler/manufacturer to the retailer at the list price or catalogue price. It is also called functional discounts, are payments to distribution channel members for performing some function. It is offered by a seller to a buyer for purposes of trade or reselling, rather than to an end user. ( Wikipedia )

Cash Discounts - Reduction in price given by the creditor to the debitor is known as cash discount. This discount is intended to speed payment and thereby provide liquidity to the firm. (Wikipedia )

Pay roll - is the sum of all financial records of salaries for an employee, wages, bonuses and deductions. refers to the amount paid to employees for services they provided during a certain period of time. ( Wikipedia )

Online Banking - allows customers of a financial institution to conduct financial transactions on a secure website operated by the institution, which can be a retail or virtual bank, credit union or building society ( Wikipedia )

II.

ETHICAL PRACTICES AND COMPARISON

A. TRADE DISCOUNT & CASH DISCOUNT & ETHICAL PRACTICES

Trade discounts have been a wide spread practice for a long time. It has a double positive effect on sales since part of the whole sale price reduction may be transferred to shelf price and part discount will be kept to the retailer as motivation in selling the product. (Bykadorov, Trade discount policies in the differential games framework :preliminary result 2010) The difference between trade discount and cash discount is simple. Cash discounts are given to motivate consumer into paying promptly while trade discount is discount given for bulk buying. Another would be in the financial aspect of recording; trade discount is not recorded while cash discount is recorded. In Philippines, many companies are practicing trade and cash discounts. You can find it in real estate, car manufacturing, department stores, market place, health care even in investments. Below are some of the practices done by Filipinos related to trade and cash discounts. SUKI SYSTEM & TAWAD SYSTEM The word suki is a Filipino term which means "loyal customer. Also called a market-exchange partnership where in one can develop into a regular costumer and supplier. In this system special privileges such as discount are given to the suki, in return the buyer will pledge loyalty to its supplier. The trust developed between consumer and seller even developed from an economic aspect to personal aspect as well. The tawad system on the other hand is defined as haggling or asking for price reduction is another common practice. In this system the buyer asks for more discounts for the goods. Usually the standard discount one might ask is around 20% to 50% depending of course on the product, location and amount you are buying.

REAL ESTATE Sample would be the sale of SM Jazz Condominium in Makati with a list price of P2,038,628.. If you are going to pay them on spot cash you (trade discount ) you will only be required to pay P1,892,662.24. But if you opt to go through financing for 15 years it would cost you P3,438,988.44. A difference of almost half the original price.

Unlike Philippines, the United States doesnt have the luxury of practicing trade discount suki and tawad system. It is not a generally wide accepted practice although some haggling and bargaining are happens in car dealerships, restaurants and even malls. But there is a growing culture of haggling in the USA, in fact in a business news from UPI.com , "Haggling is now a part of a lot more retailers," said Marshal Cohen, chief industry analyst at The NPD Group, USA Today. Statistic showed by SmarShop indicates that 40% consumers dont haggle because they dont want to look foolish .

B. PAYROLL & ETHICAL PRACTICES

For some time now, our country is still dominated by manual payroll system. Due to the present situation of our manual payroll system negative effects are now affecting our economy. TARDINESS Due to the manual form of payroll tardiness especially in the government is rampant. The Civil Service Commission issued last August 6, 2010 its Memorandum Circular No. 16-2010 which states that any public officer or employee who incurs undertime, regardless of the number of minutes/hours, ten (10) times a month for at least two (2) months in a semester shall be liable for Simple Misconduct and/or Conduct Prejudicial to the Best Interest of the Service, as the case may be. Even Senator Mirriam Defensor Santiago last November proposes Senate Bill No. 1585 also known as One Time Philippine Act. Under this law all government offices, government-owned corporations and local governments are compelled to observe and maintain their schedules according to a Philippine Standard Time (PST).

GHOST EMPLOYEES Ghost employees or fictitious employee who is not really working or who may be working but for another person maybe one of the biggest problem which resulted from manual payroll. According to Pinoy Press in Quezon City alone almost 4 billion pesos a year is lost from these so called ghost employees. With these, last August in Department of Budget and Management Secretary Butch Abad announces the implementation this year of the National Payroll System ( NPS ). He added that billions of pesos will be saved by implementing this payroll system and eradication of these ghost employees. In the United States, most of their payroll is automated. Thus tax collection is consistent and accurate. Situations such as tardiness and ghost employee are somehow little compared to us .Another comparison is that payroll tax is different from income tax. They collected this all by deducting it from the income of the employee and both are used as trust funds for future remittance.

C. ONLINE BANKING & ETHICAL PRACTICES

In June 2000, E-commerce in Philippines boosts with the passage of the Electronic Commerce Act. This facilitates computerized transactions by giving electronic messages and electronic signatures legal status. This is carried out by the Department of Trade and Industry, Department of Budget and Management and Central Bank. With these the rise of online banking in our country. Filipinos despite the advances in technology remain to be hesitant in making their transactions online. Some says online banking is one of the most convenient way of managing your finances. Hongkong Shanghai banking Corporation or HSBC encourages online banking to promote paperless transactions which received mix reactions from their clients. CONSERVATISM Filipinos attitude toward banking is very conservative thus it is worse towards online banking. In fact according to the a recent survey by Nielsen about Digital Philippines 2011, only 9 out of 100 respondents preferred online banking when transacting. A majority of 53 opted face to face transaction followed by 36 using credit card. ONLINE SCAMS Online scams had hunted Filipinos using online banking nowadays. Just recently in a raid in a house and Manila 400 illegal immigrants from Taiwan and China are running a multimillion scam via internet and phone. It was found out that the modus of their operation is to ask their victims to transfer their account because it is being hacked. In USA, online banking was at its highest. According to the American Bank Association in 2011 the online bank users explodes to 62% from 36% in 2010. This is compared to Philippines 32% last 2010 according to ComScore.com.

III.

ANALYSIS

Philippine economy has been for so long is described as owned by oligarch families. With these market competition with regards to pricing is obviously obsolete. With fewer competitors pricing is not really meant for the consumer but the benefit of the producers. Trade and cash discount is just a plain joke to smaller retailers. Cartel, price fixing and price predatory are rampant, consumer choices are not choices. Let us take a look at the cement industries, there are 3 firms controlling most of the 90% of the market (Aldaba 2010). It was observed that in in 1998 to 2008 amidst excess supply and economic slowdown prices were increased. They point it out to due to high production cost increase in fuel and power prices. But in 2010 an increase in price were observed even without changes in fuel and power price (Aldaba 2010,2011).

In the case of payroll we must have a computerized system. This is to avoid further monetary loses due to ghost employees and tardiness. The payroll system will make collections faster and better, but this can make corruption and evasion as fast. The government must study this further and put into consideration to create a body that will monitor those who are in the payroll system. Furthermore Bureau of Internal Revenue must also work on their cases against tax evaders especially those BIG FISHES. With regards to online banking more is needed for Filipinos to start gaining confidence in using this. First is the issue of safety, website from Wymoo International categorized Philippines in terms of fraud zones as a High Risk. Our government must address this problem if they want us to engage in Ecommerce. Secondly accessibility, based also from statistics only of factbrowser.com, only 36% of the Filipinos have internet access. Thirdly, online scams according to mailonline.com in London despite their laws and securities against scam, there is a 28% increase in fraud. This is composed of phishing websites, websites that are designed to look like the official website. With these online banking is still an impossible goal to achieve.

IV.

REFERENCES

www.wikipedia.com Bykadorov, Trade discount policies in the differential games framework :preliminary result 2010 www.smdc.com www.upi.com www.pdi.com www.pinoypress.com www.hsbc.com www.nielsen.com www.comscore.com Aldaba R. (2000). Tacit Price Collusion in Philippine Cement Industry?PIDS Discussion paper No 200013 Philippine Institute for Development Studies,Makati City. Aldaba R. (2010). Why Cement Price remain High despite Zero Tarrifs?PIDS Discussion paper No 200813 Philippine Institute for Development Studies,Makati City.