The government is considering to provide incentives to the opening of the smallest business units such as the operations of sari-sari stores and tricycle services which up to now many are considered part of the so-called underground economy since these do not pay income taxes.
State incentives for such small businesses are being studied to be part of the 2009 Investment Priorities Plan (IPP) as part of government programs to limit the number of job losses as a result of a worsening global economic crisis.
The Board of Investments (BoI) along with other government agencies are drafting the incentives in line with a directive from the Arroyo administration to safeguard jobs and attract investments while the country suffers from the effects of the global financial slowdown.
BoI Managing Head and Trade Undersecretary Elmer Hernandez told reporters the new IPP may include new types of incentives that are still in the process of discussions by the IPP inter-agency committee.
Unlike the previous IPPs, the 2009 IPP carries the main objective to save jobs by giving perks to companies that will not retrench workers.
“It could be possible that proportional incentives would be given on the basis of people to be retained. These are ideas to be discussed in the next inter-agency meeting,” Hernandez said.
“We may qualify existing projects for incentives to minimize retrenchment, retain workers, and avoid shutdown of plants and to avoid closure of facilities,” he added.
Incentives were also proposed to cover projects that would encourage trainings, mergers and acquisitions.
Capacity building projects may also be entitled to enjoy fiscal incentives. These are type of activities that may involve establishment of institutions for training people who may lose jobs because of the economic crisis.
Hernandez said the BoI is also considering to introduce service type of activities like the setting up of private sector help desk that would encourage, assist, and even manage finances of retrenched workers including overseas Filipino workers who will be laid off.
These institutions will serve as consultants and specialists in advising displaced workers where to invest their money.
“We are thinking of job saving measures and at the same time looking at what type of activities to qualify for incentives because under the negative list, we do not allow financing, manpower placement, massage parlor, gambling, casino and sauna bath,” he added.
Under the draft IPP, the BoI has also raised the possibility to cover sari-sari stores, and even operators of three-wheel vehicles and all sorts of small businesses which were not listed in the previous IPPs.
The new IPP is expected to retains incentives on projects involving agriculture and food production, fishery, and all types of infrastructure development except government ventures.
Specific listings include business process outsourcing activities both voice and non-voice; and creative industry including IT, IT-enabled service, software development, animation, television and film.
The rest are industries which Hernandez described as “the type of industries that you can not do without.”
These would include iron and steel, motor vehicle and basic manufacturing. It will also retain all tourism related acvities.
The mandatory listing would still include mining, export, disabled and industrial tree plantation, among others.
The BoI may also allow losing companies to claims tax deductions on labor expense covering salaries and other benefits instead of providing income tax holidays (ITH).
“We are still formulating the guidelines on this because ITH has no use if you are losing,”Hernandez added.–Ayen Infante, Daily Tribune