It is high time we help Filipino SMEs grow

Under today’s tax system, almost all of the country’s 90,000 small and medium enterprises (SMEs) pay 30 percent of their net income as taxes they remit to the national government, in addition to local business taxes which vary according to location. The 30 percent income tax rate that Filipino businesses pay is the highest in the ASEAN region. Rates in other ASEAN countries range from 17 to 25 percent.

By increasing the costs of goods and services produced by Filipino businesses, the high business tax rate in the country hampers the Filipino SMEs’ ability to compete with their counterparts in the ASEAN. On a larger scale, it also makes the country – and Filipino businesses in general – less attractive to foreign investments and partnerships.

Fortunately, the government is now pushing for the enactment into law of the Corporate Income Tax and Incentives Rationalization Act (or CITIRA), which proposes to lower the Philippines’ national income tax rate on businesses (also called the corporate income tax rate) from 30 to 20 percent over ten years. This will allow Filipino entrepreneurs to:

1) Save more. CITIRA will reduce the burden on SMEs by reducing the taxes they have to pay.

2) Expand their businesses faster. SMEs can use the savings from the lower tax rate to grow their businesses.

3) Create more jobs. Business expansion means more opportunities for the Filipino people.

Under CITIRA, tax perks will also be available for businesses that locate in economic zones and meet the government’s criteria, which include job creation, rural development, export, innovation, and the development of strategic industries where the Philippines aims to be globally competitive.

Alongside other efforts to improve ease of doing business and access to capital in the country, the urgent passage of CITIRA will energize SMEs, create jobs, and spur growth within the Philippines.

More than 99 percent of registered businesses in the Philippines are micro, small and medium enterprises (MSMEs) that employ the majority of Filipinos. These hardworking entrepreneurs are the backbone of the economy, as they provide essential goods, services, and jobs to our citizens. Some ventures even have the potential to export their products and compete with other countries; however, Filipino businesses face a number of hurdles, beginning with the high tax rates levied on businesses here in the Philippines.

Learn more about how the government is proposing #BetterInvestmentsBetterOpportunities through CITIRA. Visit www.taxreform.dof.gov.ph for more details.