Group seeks lower tax on micro-enterprise development institutions

MANILA, Philippines - The Microfinance Council of the Philippines Inc. (MCPI) reiterated yesterday the need for the passage of a bill that would slap a lower income tax rate on micro-enterprise development institutions consisting mainly of non-government organizations (NGOs).

MCPI president Ruben de Lara said in an interview with reporters that there is an urgent need to enact the “Micro-Enterprise Development Institution Act” on the creation and accreditation of micro-enterprise development institutions especially after the onslaught of tropical storm Ondoy and typhoon Pepeng.

“The colossal damage to life and property brought by tropical storms Ondoy and Pepeng exposed the ugly sight of poverty in our country. It is in this spirit that we seek your help for the early passage of a proposed bill that addresses this huge and urgent task,” de Lara said in a one-page letter to Rep. Exequiel Javier who chairs the ways and means committee of the House of Representatives.

Authors of the proposed bill include House Speaker Prospero Nograles, Rep. Ferdinand Martin Romualdez, Rep. Luis Villafuerte, Rep. Arrel Olano, Rep. Ma. Victoria Sy-Alvarado, and Rep. Ma. Evita Arago.

The proposed bill calls for the establishment of a non-stock and non-profit micro-enterprise development institutions (MEDI) that should have a fund balance of P20 million.

The MEDI could undertake poverty eradication activities but could not undertake deposit taking activities, engage in insurance business, and carry out management activities without securing the necessary licenses.

Under the proposed bill, MEDIs would only pay a tax of two percent of gross income in lieu of all national and local taxes that would be remitted to the government.

Tax proceeds would form part of the disbursable portion of the Peoples Development Trust Fund established under Republic Act 8425 or the “Social Reform and Poverty Alleviation Act.”

Furthermore, donations to the MEDI shall be fully deductible from the gross income of the donor subject to the conditions of the National Interval Revenue Code (NIRC).

De Lara said bill the bill encourages the adoption of a more holistic approach as part of a national strategy to eradicate poverty.

“A holistic approach is the provision of a wide-range of services that would enhance the chances of the poor to get out of poverty. Among others, these would include housing, education, health care, micro insurance, and other non-financial value added services,” he said.

According to him, MCPI captures the greater part of the microfinance sector in the country, with a P9 billion livelihood loan portfolio impacting on the lives of 1.7 million households or close to nine million Filipino poor.