Senator Paolo Benigno “Bam” Aquino IV filed a bill that small business owners and consumers will have a reason to celebrate once it becomes a law. This is because his Senate Bill No. 169, or the Small Business Tax Reform Act proposes lower income tax rate and exemption of value-added tax (VAT).to all kinds of small businesses in the entire Philippines.
Sen. Bam Aquino, the nephew of former President Benigno ‘Noynoy’ Aquino III and the current youngest senator of the Philippines, noted on his bill that its purposes is to further stimulate growth of small businesses in the country. The said bill defined small businesses as micro and small enterprises that have an annual gross revenue below P50 million.
As defined by the BIR (Bureau of Internal Revenue), VAT is an indirect tax that may be passed on to customers, transferee or lessee of goods, properties or services. On the other hand, a small business is an enterprise that has an actual gross sales of above P1,919,500.00. The Senate version of the E-VAT bill was authored by Sen. Ralph Recto.
Once Sen. Aquino’s bill has been approved by the Senate and signed by President Rodrigo Duterte, all small businesses will be exempted from paying income tax on its first three years of operation. In addition, the owners will enjoy a lower income tax rates thereafter. The current E-VAT is 12% additional tax, which is being highly criticized.
“This bill also proposes the lowering of the income tax rate for SMEs (Small and Medium Enterprises) and an exemption from VAT, among other methods of stimulating growth in MSEs as opposed to hindering it,” Sen. Aquino, who is also a social entrepreneur, was quoted in a statement at the Senate’s press release published this Wednesday, July 6.
“This must change, which is why we are asserting the Small Business Tax Reform Act as a measure to simplify tax procedures and unburden our small businesses of the complex tax process.” He said, referring to the complex taxation system for businesses in the country. His bill also proposes simpler bookkeeping and a special lane for SMEs.