Ease of doing business

We laud Congress for passing the law which further eases business and non-business related transactions for investors and Filipinos as well. The passage of the law was very timely – it happened on Valentine’s Day.

One of the authors of the law from the House of Representatives is Iloilo 4th district Rep. Ferjenel Biron, who also chairs the House committee on trade and industry.

The law also expands the Anti-Red Tape Act of 2007 which addresses bureaucratic red tape or delays which actually leads to corruption.

This legislative measure was in response to the Philippine’s slide in the World Bank Group’s Doing Business 2018 report – from 99th to 113th across 190 economies.

In the ease of doing business indicators, “the Philippines’ ranked 173rd in starting a business, 101st in dealing with construction permits, 31st in getting electricity, 114th in registering property, 142nd in getting credit, 146th in protecting minority investors, 105th in paying taxes, 99th in trading across borders, 149th in enforcing contracts, and 59th in resolving insolvency.” (http://business.inquirer.net/239704/philippines-ranking-world-bank-doing-business-2018#ixzz57AZ4jRaD)

The World Bank report described how hard it is open to a new business in the Philippines:

“Consider the case of the potential software entrepreneur. If she were a national of Canada, it would take just two procedures, one and a half days and less than 1 percent of income per capita to start her business in Toronto. First, she would need to file for federal incorporation and provincial registration online via Industry Canada’s Electronic Filing Centre; this costs 200 Canadian dollars ($159) and is completed within a day.

“Second, she would need to register online for value-added tax; this costs nothing and is completed within half a day. She can perform these steps online from the comfort of her home.

“As her business expands and becomes profitable, she would be expected to pay 20.9 percent of her commercial profits in taxes and contributions annually.

“However, if the same entrepreneur were a national of the Philippines, living in Quezon City, the business incorporation process would require 16 procedures, take 28 days and cost around 16 percent of income per capita.

“She would need to make 20 different tax and contribution payments and visit multiple agencies in person. Furthermore, her business would be expected to pay 42.9 percent of its commercial profits in taxes and contributions annually.” (inquirer.net)

On the distance-to-frontier metric basis, the Philippines’ score saw a slight improvement as it went from 58.32 in Doing Business 2017 to 58.74 in Doing Business 2018. However, the country’s 2018 DTF was below the average of 62.7 across East Asia and Pacific economies. (https://beta.philstar.com/business/2017/11/02/1754938/philippines-targets-reach-top-20-doing-business-rankings-2022#UXjDQSpUYXrb3piy.99)

The DTF measures the distance of each economy to the “frontier,” which represents the best performance observed on each of the indicators across all economies, according to World Bank.

The report, however, noted that the Philippines this year introduced reforms to make it easier to secure electricity service as well as pay taxes.

“The most common feature of reforms in the area of paying taxes over the past year was the implementation or enhancement of electronic ling and payment systems.”

The Philippines, alongside Angola, Armenia, Indonesia, Italy, and Niger, also improved the process efficiency when getting electricity, according to the World Bank.

The salient points of the ease of doing business law will surely make it easier for investors to locate here:

-simple request/application from five (5) to three (3) working days;

-complex transactions from ten (10) to seven (7) working days; and

-highly technical application to twenty (20) working days.

It also aims to reduce the number of signatories from five (5) to three (3) signatures; and will recognize electronic signatures or pre-signed permit/license/certification in case the authorized signatory is on official leave.

The law also provides “automatic approval of permits and licenses in case the local government unit/national government agency (LGU/NGA) fails to approve/disapprove the application within the processing time, except for cases that pose danger to public health, public safety, public morals or to public policy, and for highly technical application such as natural resource extraction activities.”

Issuance of local business permits will also be streamlined through:

-Use of single or unified business application for local tax and clearances, building clearances, fire safety inspection certificates, etc.; which shall also be available online;

-Creation of one-stop business facilitation service (also referred to as business one-stop shop) on site and/or online in all cities and municipalities;

-Mandating all LGUs to automate their business permitting and licensing systems with the help of the Department of Information and Communications Technology (DICT);

-Local clearances such as sanitary permits, environmental and agricultural clearances shall be issued together with the business permit;

-Business permits shall be valid for a period of one (1) year, and may be renewed within the first month of the year or anniversary date of the issuance of permit;

-Barangay clearances shall be applied, issued and collected at the city/municipality; collection shall be remitted to the respective barangays.

Also, procedures in securing the Fire Safety Inspection Certificate (FSIC) will be streamlined by limiting the process to 10 working days and disallowing Bureau of Fire (BFP) personnel from selling or recommending any brand of fire extinguishers or equipment.

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