Amendments to tax code eyed to help small businesses affected by quarantine

MANILA, Philippines — The Duterte administration is considering a proposed amendment to the tax code to help small businesses that suffered losses because of the enhanced community quarantine.

In a report to Congress submitted last Monday, President Rodrigo Duterte said the government is studying a proposal to amend the National Internal Revenue Code to stretch the net operating loss carry over period from three years to five years.

Duterte said the amendment seeks to "help small-sized enterprises cope with losses."

Under the law, the net operating loss of a business which had not been previously offset as deduction from gross income, shall be carried over as a deduction from gross income for the next three consecutive taxable years immediately following the year of such loss. A net operating loss carry-over shall be permitted if there has been no substantial change in the ownership of the business.

The finance department has estimated that financial losses of small businesses would amount to P465.3 billion as a result of the enhanced community quarantine, which forced them to suspend operations or to continue operating with only a skeleton force.

The longer net operating loss carry over period is expected to lower tax payments between 2021 and 2025 of affected small businesses by a combined estimated total of P139.6 billion, the agency said.

Duterte said the government is also studying a credit guarantee program to cover loans with P120 billion to grant easier access to bank financing even during crisis.

In the same report, Duterte said 199,377 small business employers have pre-qualified for the small business wage subsidy program as of April 22. A total of 6,403 employers have completed the application process on behalf of 130,188 employees.

Actual payouts are scheduled on May 1 to 15 for the first tranche and May 16 to 31 for the second tranche. The program aims to help 3.4 million employees who are sidelined by the quarantine.