THE Department of Finance (DOF) is urging micro, small and medium enterprises (MSMEs) to utilize electronic commerce (e-commerce) more, as the Duterte administration increases its efforts to put in place financial- technology (fintech) tools to foster economic inclusion in the country.
Finance Secretary Carlos G. Dominguez III said the new fintech tools the government opens a wide horizon of business opportunities for micro small and medium enterprises (MSME), including peer-to-peer lending, equity crowd-funding, merchant and e-commerce finance and invoice finance.
“The financial world is being revolutionized by new technologies. We are responding promptly to make the advantages offered by fintech [is] accessible to our enterprises,” the finance chief said.
He explained that on top of increasing the use of digital technologies to empower MSMEs, the government, through state banks, has also implemented programs meant to promote the sustainability and competitiveness of small businesses all over the country.
“I urge our MSMEs to be innovative, to explore opportunities opened by the new ways of doing business and to be bold in opening new ventures. I assure you that government is supporting you. We will support small businesses in every way possible. We know the crucial role MSMEs play in forging a better future for our people, and we will partner with you and we will help you in this task,” he added.
As of 2017, Dominguez said, outstanding loans extended by the Land Bank of the Philippines (LandBank) has reached P89.8 billion, while the Development Bank of the Philippines (DBP) also funded MSMEs through the years.
“As of June this year, the DBP has extended P13 billion in loans to small enterprises. In addition, the DBP will capacitate all its account officers so they may extend financial advisory services to MSMEs for free,” he said.
The DBP also plans to open additional lending centers to be closer to its clients, partnering with microfinance institutions and cooperatives to support MSMEs.
MSMEs comprise 99.6 percent of all business enterprises in the country, according to the DOF.
Dominguez said that in line with the Ease of Doing Business Act of 2018, several programs encouraging the use of digital technology in all government procedures will be put in place, including in the Bureau of Internal Revenue (BIR), which is now working double time on streamlining processes for the documentary requirements on renewing business permits.
The TradeNet system that automates licensing, permit, clearance and certification procedures for all regulatory agencies has likewise been established and is now being fine-tuned to enable the full interconnection of 76 trade regulatory government agencies across 18 government departments.
“This is all happening now and the Bureau of Customs [BOC] will be the first to go live this month,” Dominguez said.
This system will also serve as the Philippines’s link to the Asean Single Window.
The government is also ready to run PHPAY, which is a digital payment gateway that will enable taxpayers and other state clients to remit fees and other charges electronically. The system was pointed out to cut transaction costs across the board.
The Philippine Business Data Bank will soon be on the testing stage to ensure that it serves its purpose efficiently of being the single repository of business registration information in the country.
Tax reforms for MSMEs
The finance chief said the Duterte administration will continue to support the growth of MSMEs by pushing the passage into law of the second package of its tax reform program, which aims to lower the corporate income tax (CIT) rate and modernize investment incentives.
Package 2 of the tax-reform program aims to benefit MSMEs, which pay the regular corporate income tax rate of 30 percent, in contrast to a selected few which pay only between 6 percent and 13 percent, because they were able to get incentives from various investment promotion agencies.
Dominguez said the government has proposed to Congress to keep the income-tax holiday and other income-based incentives, while replacing the 5-percent gross income earned tax in lieu of all taxes with a 15-percent tax on net taxable income to narrow the gap between those under the standard rate and incentive recipients.
Package 2 of the Comprehensive Tax Reform Program, which aims to reduce CIT rates from 30 percent to 25 percent, while rationalizing the country’s fiscal incentives regime, was submitted by the DOF to Congress in January this year. The measure is under House Bill 7458 at the House of Representatives.