A BILL that seeks to boost the growth of microenterprises by sparing them from income taxes and easing their tax filing process and registration was filed at the House of Representatives last month.
Newly registered microbusinesses with assets below P3 million will be exempt from income taxes for three years under House Bill No. 5438 by Party-list Rep. Eduardo C. Villanueva.
“By reducing costs, simplifying compliance and offering crucial relief during a business’ formative years, this measure strengthens the capacity of microenterprises to survive and thrive,” he said in the bill’s explanatory note.
Microenterprises make up about 90% of businesses in the Philippines, with 1.12 million of the country’s 1.24 million registered firms falling under the category, according to government data.
“Despite this outsized role, microenterprises remain burdened by complex regulatory processes and high tax compliance requirements that limit their growth and sustainability,” Mr. Villanueva said.
Aside from granting income tax exemptions, the measure also proposes to simplify compliance for microbusinesses by requiring them to file tax returns just once a year.
The proposal also mandates the Bureau of Internal Revenue to develop an online registration system for businesses, including tax filing and payment platforms to streamline government transactions and reduce red tape.
“The World Bank’s Doing Business 2020 Report ranks the Philippines 171st out of 190 economies in starting a business, where entrepreneurs face 13 separate procedures taking an average of 33 days, along with steep compliance costs,” Mr. Villanueva said.
The bill is a strong step toward supporting the microbusiness sector, but it might cost the government billions in lost revenue, said Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co.
“This proposed three-year income tax exemption for microbusinesses is a smart, targeted stimulus,” he said in a Viber message. “Giving them tax relief means more cash flow for hiring, reinvesting and surviving tough times.”
Authorities may need to forgo about P30 billion to P50 billion in revenue over three years, but Mr. Ravelas said the measure could be seen as a “strategic investment” aimed at spurring bottom-up economic growth “if paired with easier compliance and better access to credit.” — Kenneth Christiane L. Basilio
