Last month, the Department of Trade and Industry (DTI) led the celebration of SME Month. Maybe we were all too preoccupied to even notice it, but since CSR Philippines is on a mission to empower MSMEs toward inclusive growth, we are extending the celebration of SME Month this August.
We are giving free business and tax seminars, round table discussions on tax strategies, and executive business coaching to enjoy a tax-free lifestyle (by appointment only) on a first come, first served basis. Better be ready than sorry as the Bureau of Internal Revenue (BIR) is already set for its nationwide audit. As per RMO 4-2013, all taxpayers are considered possible candidates for audit. Although priority is given to professionals and sole proprietors whose income tax due is less than P200,000, the hit list covers almost all sectors.
Barangay Micro Business Enterprises
With the aim of integrating microenterprises into mainstream economy, Republic Act 9178 or the Barangay Micro Business Enterprises (BMBE) Act was signed into law on November 13, 2002. After more than a decade, very few are aware of its existence and its benefits that are supposed to encourage formation and growth among local micro businesses.
It always comes as a surprise to starting entrepreneurs every time I mention the BMBE law. Despite the relentless efforts of the DTI through its Bureau of Micro, Small and Medium Enterprises Development (BMSMED), many are still reluctant due to either the bureaucracy in the registration process or overwhelming BIR compliance. Both are considered unreasonably pricey for startups, resulting in insolvency or discontinuance of the business even before it makes profit. This, however, is contrary to the very reason the BMBE law was enacted, which is to encourage increasing micro enterprises, including sari-sari stores, ambulant vendors, and other self-employed individuals, to register and to give their share in inclusive growth.
BMBE refers to any business entity or enterprises engaged in the production, processing, manufacturing of products or commodities, including agro-processing, trading and services, whose total assets should not be more than P3 million.
However, licensed professionals like doctors, lawyers, accountants and engineers in connection with the exercise of their profession are excluded. Furthermore, a branch, subsidiary, division or office of a large scale enterprise, or those establishments whose policies are determined by large scale enterprises or by persons who are not owners or employees (such as franchises) are part of the exclusions.
As provided in the BMBE law, the following incentives and benefits are available to those who will be given the BMBE Certificate of Authority, which shall be effective for a period of two years and renewable for a period of two years for every renewal:
1. Exemption from taxes and fees. All BMBEs shall be exempt from income taxes. Unfortunately, LGUs are simply encouraged to reduce the amount of local taxes, fees and charges they impose. In view of this, I fully support House Bill 1742 granting BMBEs exemptions from local business taxes. Active intervention and participation of LGUs in granting incentives and benefits to BMBEs will help generate much needed employment and alleviate poverty. In fact, the creation of One-Stop Business Registration Center in all LGUs to handle the efficient registration and processing of permits and licenses for BMBEs is also mandated.
This, however, is yet to be observed as there are very few LGUs who have implemented the BMBE law. In Quezon City, which is the case study area of the World Bank in the ease-of-doing-business report, the One-Stop Business Registration Center only operates during the first quarter of the year.
2. Exemption from the coverage of the Mininum Wage Law. The BMBE shall be exempt from the coverage of the Minimum Wage Law, provided that all their employees shall be entitled to the same benefits given to any regular employee, such as social security and healthcare benefits.
3. Access to financial assistance. The Land Bank of the Philippines (LBP), the Development Bank of the Philippines (DBP), the Small Business Guarantee and Finance Corporation (SBGFC), and the People's Credit and Finance Corporation (PCFC) shall set up a special credit window that will service the financing needs of BMBE. The Government Service Insurance System (GSIS) and Social Security System (SSS) are also mandated to do the same for their members who wish to establish a BMBE.
The concerned financial institutions are encouraged to wholesale the funds to accredited private financial institutions, including community-based organizations such as credit, cooperatives, non-government organizations (NGOs) and people's organizations, which will in turn directly provide credit support to BMBE. Let us hope appropriated funds will not go to bogus NGOs or dummy corporations like what happened to the pork barrel.
4. Access to training and technology transfer. A BMBE Development Fund amounting to P300 million from PAGCOR shall be set up and shall be administered by SMED Council.
The DTI, Department of Science and Technology (DOST), the University of the Philippines Institute for Small Scale Industries (UP ISSI), Cooperative Development Authority (CDA), Technical Education and Skills Development Authority (TESDA), and Technology and Livelihood Resource Center (TLRC) may avail of the said fund for technology transfer, production and management training, and marketing assistance to BMBEs.
The DTI, in coordination with the private sector and non-government organizations (NGOs) like the CSR Philippines, shall explore the possibilities of linking BMBEs with other enterprises.
On the first day of the 16th Congress, Senator Bam Aquino filed seven bills that aim to empower the poor through jobs and livelihood opportunities. This is why I supported his candidacy. I am really looking forward to seeing him as a champion of the micro, small and medium enterprises (MSMEs)-the great propeller of the country's economy. With much hope and vigor, I support the bills he filed, particularly those directly supporting the MSMEs:
1. The Go Negosyo Bill, which expands Republic Act 9184, otherwise known as the Magna Carta for Micro, Small, and Medium Enterprises (MSMEs), and supports MSMEs with incentives and makes it easier for them to start up;
2.The Microenterprise Development Institutions (''MicroDev'') Bill, which supports micro-finance and micro-enterprise support groups;
3. The Youth Entrepreneurship Bill, which proposes the inclusion of entrepreneurship in secondary and post-secondary education curriculum, as well as the creation of a national program to promote youth entrepreneurship;
4. An expansion of the Poverty Reduction through Social Entrepreneurship Bill (PRESENT), filed in the 15th Congress, which supports the creation of social enterprises and offers incentives and benefits to business that genuinely help the poor.
While remaining vigilant, as it will take a while before these bills get enacted into law, I enjoin all administration critics in its battlecry, ''Kung walang corrupt, walang mahirap'', to support the young senator in his quest to empower entrepreneurs. I find these bills more sustainable and strategic, as empowering our people to do some serious work is key, not just in addressing poverty, but also in ousting corrupt officials from government. As the good senator said, ''The bottom line of these bills is that we have to create more support for micro and small businesses because they are the ones that create jobs for our people (not the politicos).''
PNoy should support Sen. Bam Aquino in his laudable action. And if PNoy is really serious in fighting against corruption, I have five suggestions, which will test his political will: Abolish the pork barrel; abolish the Bureau of Customs; stop the nationwide BIR audit (focus on risk-based, computer-aided audit on pre-select industry instead); do not make government agencies as withholding tax agents (they do not remit anyway); and computerize the tax system, including customs.