Analysts: Informal sector to add P70-P100B to govt

Dr. Victor Abola of the economics department of the University of Asia & the Pacific (UA&P), which has done an indepth study on the informal sector, has told The Manila Times that every year the government loses up to P100 billion in revenues from the informal sector.

This amount is made up of about P30 billion in unpaid value added taxes in informal transactions, unpaid business permits and registration fees and such things.

Perhaps this calculation includes “informal” transactions by formal-economy players—such as professionals (doctors, dentists, lawyers, accountants, etc.)—who misdeclare the amount of business they do.
The Magna Carta for Workers in the Informal Sector (MACWIE) will add some P1.5 billion to P2.5 billion. This is because the Magna Carta will exact from the P50 to P100 from every IS worker as a registration fee. Registration would, however, entitle the workers to benefits that are much more than the P50 to P100 fee.

Registered workers and micro-entrepreneurs would be entitled to social protection in the form of health and accident insurance.

The Magna Carta for IS workers is pending at the House of Representatives as House Bill 1955. With Rep. Dan Fernandez of Laguna as principal author, the bill was prepared by the MAGCAISA alliance of people’s organizations, nongovernment organizations and other institutions promoting protection for workers in the informal sector.

In the Senate the counterpart bill, S.B. 2708, was filed by Sen. Miriam Defensor-Santiago.
MAGCAISA is the acronym of Magna Carta for the Informal Sector Alliance. Its advocacy is supported by Homenet Asia (and of course Homenet Philippines) and the German foundation, Frederich Ebert Stiftung (FES).

Resistance to “outing”

It won’t be easy getting informal sector entrepreneurs to come out and declare their existence to the government.

Even the head of the Department of Trade and Industry’s Bureau of Micro, Small and Medium Enterprises, Director Rhodora Leaño, has told The Times that many micro and small business entrepreneurs don’t want to fill up documents even if it means receiving assistance—including cash advances or capital contributions.
She attributes this resistance to “lack of social preparation.”

Some researchers looking into the matter of the informal sector attribute the “reluctance to be exposed to the government” to fear of “kotong”—fear of being harassed and solicited by government employees.
Dr. Abola urges government to treat the informal sector more effectively and draw its entrepreneurs out by being more business friendly because the sector is a large part of the total economy. He said the informal sector contributes some 20 percent to 30 percent to gross domestic product (GDP), the total value of all goods and services produced in the country. –Rene Q. Bas, Editor in Chief, Manila Times