MANILA, Philippines - Tax professionals are crafting a bill that would lower income taxes charged on micro and small enterprises.
"We are working with Senator (Benigno) "Bam" (Aquino) and we are still soliciting data... It's in a very infant stage," said Alexander Cabrera, senior partner at audit firm Isla Lipana & Co./PwC Philippines, in a briefing on Wednesday.
"This can be pushed next Congress," he added.
The bill aims to lower income levies on covered firms to "about 5 percent" or a "fixed amount" to be paid every year.
Currently, micro and small businesses are charged based on income brackets under the National Internal Revenue Code. However, they enjoy some perks from the government.
For instance, the three-year Investment Priorities Plan gives tax and non-tax incentives to micro-, small- and medium enterprises (MSMEs). However, Cabrera said these are not enough.
"We would only like to assist the micro and small. Those in the medium category, they already pay taxes which is good because they should contribute to the government," Cabrera said on the sidelines of the briefing.
"But these micro and small businesses, when you ask them, they will tell you that, 'we want to give you big business, but can you not invoice us?' We are really looking at helping these entities," he added.
According to the Department of Trade and Industry, more than 97 percent of local corporations are MSMEs, which include small sarisari stores, grocery outlets and convenience stores.
However, Finance Undersecretary and chief economist Gil Beltran said only 10 to 15 percent of MSMEs remit taxes to national coffers.
"Their collection rate or tax compliance rate is very, very low. The thing is, if we agree to lower levies, will they promise to pay taxes already?" Beltran said by phone.
Cabrera said that is the intention of the planned measure.
"Perhaps if they see a simple, singular tax regime, they will be more inclined to register and pay," he explained.
"With that comes having a financial statement that will also help them secure bank credit because the problem now is, most of these firms cannot borrow because they cannot prove they can pay," he added.
No estimate is available as to tax collections from MSMEs and potential tax losses from the proposal.
Cabrera also assured that the bill will have "criteria" which businesses should meet before being qualified for lower taxes.
One of them is being a "social enterprise," which essentially being able to contribute to over-all poverty alleviation.
The audit firm yesterday launched this year's Developmental Social Enterprise Awards, where the winner gets a cash assistance and free consultancy services to expand his or her business.
For its part, the Tax Management Association of the Philippines on Wednesday also signed an agreement with the Center for Strategic Reforms of the Philippines to support MSMEs.
The agreement, among others, said parties should "work cooperatively" and "regularly share information" on programs concerning MSMEs.
"This agreement is hereby made... (to) collaborate in empowering Filipino taxpayers, developing micro, small, and medium enterprises (MSMEs) and advocating genuine tax reform...," the document said.