Majority of micro, small and medium enterprises (MSMEs) in the country are supportive of the Tax Reform for Attracting Better and High-Quality Opportunities or TRABAHO bill currently pending in the Congress, the Department of Finance (DOF) has reported during a recent Cabinet meeting in Malacañang.
This was based on the results of independent, third-party surveys conducted during the series of ‘Sulong Pilipinas’ forums organized by the government and held in key cities in the country last November 2018.
The surveys showed that 91 percent of the micro, small, and medium enterprises that answered the questionnaires given to them during the series of forums expressed their full support for the TRABAHO bill, said Finance Assistant Secretary Antonio Lambino II in his report before the Cabinet.
Lambino has been a prime mover of ‘Sulong Pilipinas’ since it was first held in Davao City in June 2016.
TRABAHO bill is the second package of the Duterte administration’s Comprehensive Tax Reform Program (CTRP) that aims to reduce corporate income tax (CIT) and rationalize fiscal incentives, especially for MSMEs that account for more than 99 percent of local businesses and 63 percent of jobs. (Source:https://www.dti.gov.ph/dti/index.php/2014-04-02-03-40-26/news-room/179-workshop-on-market-access-for-MSMe-set)
CTRP’s first package–the Tax Reform for Acceleration and Inclusion (TRAIN) Law–took effect January last year and slashed personal income tax (PIT) rates for the benefit of 99 percent of taxpayers, but raised the excise taxes on tobacco products, fuel, automobiles, and sweetened beverages to support public health and environmental goals and also broaden the revenue base.
Finance Secretary Carlos Dominguez III earlier said the reduction in CIT would benefit more than 99 percent of corporations in the Philippines, but a small percentage of businesses representing the “interests of a few” has opposed the move to rationalize fiscal incentives that have for long benefitted them.
Dominguez said the CIT would gradually be reduced from 30 percent to 20 percent to bring the Philippines closer to the regional average. He said having a CIT rate higher than those of neighboring economies at 30 percent was a barrier to investments.
A companion measure of this package is the rationalization of fiscal incentives. He said, for years, the government has relied on granting fiscal incentives as a means to attract foreign direct investments (FDIs).
A select group of big firms, many of them in the country’s list of Top 1000 corporations, enjoy discounted CIT rates of 6 to 13 percent while most companies, including small enterprises, pay the steep rate of 30 percent. The favored big corporations have also been enjoying other tax perks for as long as 40 years already.
The same ‘Sulong Pilipinas’ surveys also showed that 92 percent of micro, small and medium-sized enterprises (MSMEs) considered the TRABAHO bill an “important” factor “in the development of the country.”
SMEs also listed a number of recommendations during the forums that they think would improve the ease of doing business in the country and further improve economic growth in the long run.
The top recommendations include the prioritization of agricultural productivity to increase farmers’ income; construction of more infrastructure to improve access and mobility; simplification of loan requirements for MSMEs and farmers; improvement in the access to education for poor families, and the provision of livelihood training for the recipients of 4Ps (Pantawid Pamilyang Pilipino Program) assistance from the government.
Also included in the recommendations are the streamlining of government processes and reduction of red tape; the planning and proper implementation of infrastructure projects to lessen disruption to business; increase of police and military visibility in rural and coastal areas and extension of martial law in Mindanao; construction of more health facilities and more health services nationwide; and the provision of tax incentives for MSMEs.
Dominguez remains optimistic over the passage and implementation of the remaining tax reform packages in the coming months. He said these measures would bring a more modern tax system conducive to investments.
“It will raise revenues to fund our infrastructure and social development programs. It will bring our tax effort to levels compatible with the most dynamic economies of the region,” Dominguez said in a statement.
In November 2018, four regional forums were held in Cebu City; San Fernando, La Union; Clark, Pampanga; and Davao City to increase participation of small businesses in these events.
The Sulong forum was first convened in June 2016 by the then-incoming economic team led by Dominguez even before then-Davao City Mayor Rodrigo Duterte formally assumed the presidency.