What programmes have been laid out for MSMEs so far? How are they thriving amid the pandemic?
As of 2019, the Philippine Statistics Authority (PSA) has recorded a total of 1,000,506 businesses operating in the Philippines. Among these numbers, 995,745 (about 99.5 per cent) are Micro, Small, and Medium Enterprises (MSMEs) and 4,761 (about 0.5 per cent) are large enterprises.
MSMEs make up a huge chunk of the Philippine economy. The top five industry sectors in the country are (1) Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles (462,492); (2) Accommodation and Food Service Activities (144,024); (3) Manufacturing (115,387); (4) Other Service Activities (65,918); and (5) Financial and Insurance Activities (46,100).
So how is the country taking care of them? What programmes have been implemented for small-scale entrepreneurs? What were the challenges they faced?
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In a dialogue with Tatler, appointed head of National Economic and Development Authority (NEDA) Karl Chua said that the government has laid out several programs for the small business sector.
"[As of this writing] we passed several laws to help the MSME [sector]. Few of these include the Ease of Doing Business and Efficient Government Service Delivery Act of 2018 (Republic Act 11032), Tax Reform for Acceleration and Inclusion or TRAIN law, and the CREATE Act (previously known as the Corporate Income Tax and Incentives Reform bill)," he said.
"These laws have been passed to lower the income taxes of our MSMEs," he added.
Under the TRAIN law, the tax threshold for MSMEs was raised from PHP1.5 million to PHP3 million. This means that businesses with gross sales below these amounts can choose to pay a flat rate of just eight per cent instead of paying the regular income tax.
For example, a small novelty shop that earns at least PHP500,000 in gross sales annually would have to pay PHP 52,500 tax before the TRAIN law. With the new rules, their tax will be down to just PHP 25,000 a year using flat tax.
Meanwhile, the CREATE Act will provide assistance to MSMEs by reducing the corporate income tax from five per cent to 10 per cent. “The impact of CREATE is two-fold. First, it provides immediate relief to our MSMEs with a five or 10 percentage point reduction in the regular corporate income tax (CIT) rate. Second, it brings our corporate tax rate closer to our peers in Southeast Asia and enhances our fiscal incentives system to help attract more foreign direct investments (FDIs), which will help generate more jobs and accelerate our recovery,” Chua said.
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