Will proposed tax cuts benefit small businesses?
Local business leaders give pros and cons of gov’t-proposed measure
Cebu business stakeholders lauded the Duterte government’s proposal to reduce the tax imposed on sales of micro-enterprises in the country, saying that this move will help small players grow.
A local business leader, however, said that this would hurt more than it would do good to micro-businesses.
Ma. Elena Arbon, Department of Trade and Industry (DTI) Cebu provincial director, said this will be very advantageous to micro-enterprises as it means more resources for them to grow and expand.
“Instead of using their funds to pay for tax, they can channel it back to their businesses and grow it, maybe through inventory or payment of liabilities,” she said in a text message.
The proposed change is part of the Department of Finance’s (DOF) tax reform package under the current administration, which is aimed at reducing tax rates both for corporate and personal income.
Last week, the DOF presented its proposal before the Senate Ways and Means committee.
In the current set-up, micro-businesses are required to file quarterly income tax, but they are expected to only file tax on annual gross sales under the proposed scheme.
Presently, businesses in the Philippines, whether micro, small, medium, or conglomerate, pay the same tax rate of 30 percent.
Ma. Teresa Chan, Cebu Chamber of Commerce and Industry (CCCI) past president, meanwhile, said this would be good for micro-enterprises in the country.
“It might even encourage those who are not registered to register and be legitimate. This might even increase total collection related to this tax,” she said.
But Philip Tan, past president of the Mandaue Chamber of Commerce and Industry (MCCI), said this would be more disadvantageous to micro-businesses than it would be beneficial.
He said the current tax system taxes net income of businesses, which is a venture’s gross sales minus total expenses such as salaries and other operating costs.
Tan said if the tax the micro-businesses pay is based on their gross sales and not on their net income, then the small players will end up paying more.
Tan is proposing a bracketing system for micro-businesses instead, allowing them to pay according to the size of their income.
Under Republic Act No. 9178 or the Barangay Micro Business Enterprise Law of 2002, micro-enterprises are defined as those businesses with total assets of not more than P3 million.
According to DTI, 99.6 percent of enterprises in the Philippines are micro, small, and medium-sized, 90 percent of which are micro. The remaining 0.4 percent, meanwhile, are large businesses.
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