The business of easing doing business

Making it easier to start a business is a good place to start. But if the government stops there, it will be as good as a bad start.

There are a number of proposed legislations on easing doing business that’s focused on making it easier to secure licenses and permits. It’s laudable really, but implementing the law, if passed, is an entirely different matter. It is important to help entrepreneurs set up fast. Truth be told, that is actually the easier part. After birth, it is an entire lifetime of interaction with the government.

It’s okay to have an ease of doing business commission under the law, as proposed. But if the new body cannot compel action from other government agencies or impose sanctions, we cannot hold our expectations high, or maybe we should have no expectations at all.

I would like to devote space this Sunday and up to the next, on why it is difficult to do business in the Philippines from the actual experience of our clients. Here are my selected 10 things:

1. Dinosaur laws in a knowledge economy. That’s what many of our foreign equity limitations are about. Case in point is the case against Rappler and the issue of whether they are beneficially owned by foreign investors.

Our 1987 Constitution requires 100 percent Filipino ownership of mass media. We cannot argue on its wisdom when this policy was made during that time. But time did not stand still. What is so scary now about allowing foreign ownership in news companies in the Philippines? News is now accessible from foreign news companies and from any individual human being as they happen through social media channels and apps. Foreign television channels are also accessible digitally. What risk are we trying to address, when information is everywhere and fake news cannot be stopped, except through discernment.

They are dinosaur laws and we are still feeding the dinosaur. Outdated laws are still implemented against present-day realities, even as they have lost their significance and rationale.

2. Inconsistent local government policies vs. national law. There are many examples, but I will cite just a couple. Under the law, local business tax shall be based on gross sales or gross receipts of the previous year. At least a couple of LGUs (local government units), to my knowledge, attempted to assess based on a floor of 20 percent more compared to what was paid in the previous year. Totally baseless and apparently extortionary.

Another example: traditional holding companies are not financial institutions. But they are being assessed as financial institutions by a few LGUs, to my knowledge. We can understand that LGU personnel deserve better training to update their know-how. But for the LGU personnel to insist on what is wrong despite being presented evidence to the contrary – hats off to them for making business annoyingly difficult.

3. Customs operations deserve meaningful modernization. There is actually a Customs modernization law passed in 2016 under PNoy’s presidency. With all due respect though, that law really begs the issue.

The real issue is on the human side and their traditional weaknesses. I am not suggesting anyone should be a saint or that angels be hired. It’s just the push to use technology (which is abundant and available) should be supported or compelled. We need to get to the no-contact import entry declarations and online processing that will allow efficient, transparent, and aboveboard dealings. No one is stopping the bureau from conducting a post-entry audit. But no one should also feel that their legitimate goods are being held hostage and so is their business continuity.

4. What is worse than having no law? It’s having one, but not implemented. There are many beautiful laws and policies that are meant to give privileges or protect commercial rights. They are beautiful because you can stare at it, but you cannot touch it. It’s like tempting a kid with a cookie, but that cookie is put in a place that’s so difficult to reach.

There are numerous examples. I prefer to cite the Barangay Micro Business Enterprises law. For decades, this law existed and remained unamended or revoked even under the TRAIN (Tax Reform for Acceleration and Inclusion) Law. It grants income tax exemption to small businesses with no more than P3 million in assets. It was not advertised or sufficiently disseminated, and availment was not encouraged. Rules imposed on hapless small entrepreneurs made it impossible for them to avail of the exemption under the law. It could have helped many who have the right to be helped.

Laws can take effect, but can businesses trust that they will be effectively implemented?

(To be continued)

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Alexander B. Cabrera is the chairman and senior partner of Isla Lipana & Co./PwC Philippines. He is the chairman of the tax committee, and the vice chairman of EMERGE (Educated Marginalized Entrepreneurs Resource Generation) program, of the Management Association of the Philippines (MAP). Email your comments and questions to [email protected]. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.