MANILA, Philippines — Congress should immediately pass two pending fiscal reforms to address the urgent needs of pandemic-hit businesses as identified by a recent World Bank survey, according to the Department of Finance (DOF).
Citing a World Bank study conducted from July 7 to 14, Finance Secretary Antonio Lambino said that 74,031 firms all over the country, more than 90 percent of which are micro, small and medium enterprises (MSMEs), identified their most desired forms of intervention to recover from the impact of the coronavirus pandemic.
These include cash transfers (46 percent), loans at subsidized rates (36 percent), tax exemption or deduction (22 percent), deferral of rent, mortgage or utilities (22 percent), and deferral of loan payment (22 percent).
Lambino said the survey findings should serve as a “strong impetus” for Congress to immediately pass the Corporate Recovery and Tax Incentives for Enterprises (CREATE) and Financial Institutions’ Strategic Transfer (FIST) bills, as these measures aim to address these concerns.
“We hope that this recent report helps persuade our lawmakers to pass both priority measures to provide immediate aid to COVID-19 battered businesses and spur the quick recovery of the domestic economy from the pandemic,” Lambino said.
“We cannot emphasize enough how critical it is for these measures to be passed by the Congress, primarily for the benefit of MSMEs that comprise over 99 percent of local businesses and employ an overwhelming majority of Filipino workers,” he added.
The World Bank survey, which was done in partnership with the DOF and the National Economic and Development Authority (NEDA), was aimed to measure the impact of the pandemic on companies, with focus on MSMEs.
“The findings of the study confirm that the Philippine government’s economic recovery programs are responsive to the needs of MSMEs. Bayanihan 1 launched the largest cash transfer program for small business workers in our country’s history along with deferral of loan and utility payments. Bayanihan 2 includes similar programs and infuses capital into GFIs (government financial institutions) for lending to MSMEs and other productive sectors of the economy,” Lambino said.
The CREATE bill proposes the immediate cut in the corporate income tax rate from 30 to 25 percent this year. The rate would be further cut by one percentage point each year until it reaches 20 percent by 2027.
Earlier, Finance Secretary Carlos Dominguez said the immediate reduction of corporate income tax is estimated to free up P37 billion for businesses, which would allow them to expand their businesses and hire more workers.
“The hefty corporate income tax cut will free up around P37 billion for businesses in the second half of 2020 alone,” Dominguez said.
The bill also seeks to rationalize the country’s tax incentives system.
FIST, on the other hand, will allow banks to dispose of non-performing assets through asset management companies, enabling them to clean up their balance sheets and extend more funds to sectors in need.
The bill improves upon the law that created the Special Purpose Vehicles in response to the Asian Financial Crisis in the early 2000s, Lambino said.
“Without the FIST bill, the economy is going to be worse off. The worst hit are going to be the small and medium enterprises. Helping banks clear their books allows them to lend more money to MSMEs and other businesses,” he said.
CREATE and FIST have already been passed by the House of Representatives, and are currently pending in the Senate.