TO help businesses in their preparation for the full implementation of the Asean integration in 2020, the chairman of the House Committee on Trade and Industry said the government should exempt start-up micro, small, and medium enterprises (MSMEs) from taxes.
Nacionalista Party Rep. Mark Villar of Las Piñas, the panel chairman, said the government should exempt start-up enterprises from all national and local taxes for at least the first two years of their operation to help them get organized and establish their operations and market base.
“The Asean integration is an opportunity for tremendous growth of MSMEs. In the Philippines a very small percentage goes into business, and the majority of those who oppose the idea is said to be intimidated by the lack of knowledge or skill available. While more Filipinos are now more adept to entrepreneurship, there’s still much more to do,” Villar told the BusinessMirror.
In 2007 Asean leaders adopted the Asean economic blueprint at the 13th Asean Summit in Singapore to serve as a coherent master plan guiding the establishment of the Asean Economic Community (AEC) in 2015.
The Asean economic integration seeks to establish a single market and production base with free movement of goods, services, labor and capital. The areas of cooperation include human-resources development and capacity building; recognition of professional qualifications; closer consultation on macroeconomic and financial policies; trade-financing measures; enhanced transactions through e-Asean; integrating industries across the region to promote regional sourcing; and enhancing private-sector involvement for the building of the AEC.
The lawmaker, citing data from the Department of Trade and Industry (DTI), said there are 944,897 business enterprises in the country, 99.58 percent, or 940, 886, of which are MSMEs and the remaining 0.42 percent are large enterprises. The number of these small enterprises will increase if the government will exempt them from taxes, he said.
“MSMEs have helped lower poverty incidence in the last few years.
However, if we look closely into their geographical spread, the majority of the business establishments are located in urban centers. We hope to provide a solution such that rural areas are given the same kind of opportunity and information,” he said.
In the 16th Congress, Villar filed House Bill 4902 that seeks to give start-up enterprises the proper time to stand on their own.
“This economic growth and the hugely improved business climate in the Philippines encourage individuals or firms to start a business capitalizing on developing a product or service for which they believe there is a demand. Due to limited revenue or high costs, most of these small-scale operations are not sustainable in the long term without government support or without additional funding from venture capitalists,” he said.
The Start-up Business bill, now pending at the Committee on Ways and Means, provides that it is the declared policy of the state to foster national development and promote inclusive growth by encouraging the creation of enterprises that facilitate job creation, production, innovation and trade in the country.
The bill refers to “start-up enterprises” as newly registered businesses engaged in industry, agribusiness and/or services, whether a single proprietorship, cooperative, partnership or corporation.
It provides that a start-up enterprise shall be exempt from all national and local taxes for the first two years of its operation provided that it is not an affiliate, a subsidiary, or a franchise of any existing company.
In the case of a sole proprietorship or partnership, the proprietor or the partners of the start-up enterprise shall not have any previous or other existing registered companies, partnership or businesses, the bill said.
In the case of a corporation, each stockholder of the start-up enterprise shall have at least a 5-percent share in stocks and the corporation shall have no nominal stockholders or stockholders holding the shares in trust for others. Furthermore, all stockholders of the start-up enterprise shall not have held shares of any previous or existing corporation with at least a 5-percent share therein, nor registered any former or existing sole proprietorship or partnership, the bill added.
The measure also assigns the Bureau of Internal Revenue, in coordination with the DTI and the Securities and Exchange Commission, to promulgate the necessary rules and regulations for the effective implementation of the Act not later than 30 days upon its effectivity.
Villar vowed to refile the bill should he earn another House seat in the next Congress.
Image credits: Alysa Salen