By Prof. Enrique M. Soriano Tuesday, November 27, 2012 “LET us work in partnerships between rich and poor to improve the opportunities of all human beings to build better lives. ” — Kofi Annan Most family businesses are categorized as micro, small and medium enterprises or MSMEs. These firms contribute to the creation of wealth, employment, and income generation, both in rural and urban areas, thus, ensuring a more equitable income distribution.
They are vital in dispersing new industries to the countryside and stimulating gainful employment. A country like the Philippines where labor is abundant has much to gain from entrepreneurial activities. SMEs are more likely to be labor-intensive. Thus, they generate jobs in the locality where they are situated. In this sense, they bring about a more balanced economic growth and equity in income distribution. In the last five years, the MSME sector accounted for about 99. 6 percent of the registered businesses in the country by which 63 percent of the labor force earn a living. Around 35. percent of the total sales and value added in the manufacturing come from MSMEs as well. The constraints that MSMEs often face can generally be categorized as: (1) non-financial barriers (cost of getting electricity, heavy regulation, high tax rates, and corruption); and (2) financial barriers (access to finance). Based on the World Bank’s indicators on the ease of doing business, the Philippines lags behind its neighboring countries in reducing the number of start-up procedures, cost to start a business (measured in terms of percent of gross national income per capita or GNI pc), and number of tax payments per year.
These non-financial barriers to MSME development translates to high cost of doing business or poor business environment, and discourages the formation of new MSMEs or the entry of existing MSMEs into larger markets, among others. In a seminar conducted by Ms. Cynthia Dela Cruz of the Bureau of Micro Small Medium Enterprise Development (BMSMED), Department of Trade and Industry last November 6, 2012, she discussed R. A. 9178 or the Barangay Micro Business Enterprise Act of 2002.
Despite it being signed into law on November 13, 2002 or 10 years ago, not too many people, especially the poor sector (which is its target beneficiary) knew about it. Some arguments for the ‘hush-hush’ or reluctance of some LGUs to promote it is the fear that it can be abused and that it does not contribute much to the coffers of the local government unit concerned because of low business fees or income tax exemptions. However, we believe that its benefits to the economy far outweigh the possible negative consequences.
The “Barangay Micro Business Enterprise” or BMBE, refers to any business entity or enterprise engaged in the production, processing or manufacturing of products or commodities, including agro-processing, trading and services, whose total assets including those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated, shall not be more than P3 million. Businesses rendering a particular service/s in connection with the exercise of one’s profession requiring the passing of a government licensure examination is excluded.
Many small businesses complain of getting discouraged to start their mini ventures due to bureaucratic requirements and sometimes unreasonable fees and charges. The BMBE law seeks to eradicate these obstacles by building a business friendly climate, particularly in the area of improving registration and licensing procedures. This law mandates all Local Chief Executives to establish a One-Stop Business Registration Center in their areas to handle the efficient registration and processing of permits and licenses of BMBEs.
Furthermore, it encourages the formation and growth of local micro businesses and integrates these enterprises in the informal sector with the mainstream economy, thru the rationalization of bureaucratic restrictions; active intervention of the government especially at the local level; and granting of incentives and benefits. The principal benefit of the BMBE law is exemption from income tax arising from the operations of the enterprise upon registration and issuance of a Certificate of Authority effective for a period of two years, renewable for a period of two years for every renewal.
To defray the administrative costs of registering and monitoring the BMBEs, the LGU may charge a fee not exceeding P1,000. The second main benefit is exemption from the coverage of the Minimum Wage Law provided that all employees covered shall be entitled to the same benefits given to any regular employee such as social security and healthcare benefits. (Once a BMBE is registered and issued with a Certificate of Authority by the Municipal or City Treasurer, it is automatically exempted from the minimum wage law. However, the rule is that laws shall have prospective application only. Thus, an enterprise’s exemption from the coverage of the minimum wage law can only be applied to employees hired after its registration as a BMBE. In addition, MSMEs are given assistance in technology transfer, production and management training and marketing by government agencies such as the DTI, DOST, UP-ISSI, CDA, TESDA and TRC. For more information, log on to: http://www. dti. gov. ph. /uploads/file/Barangay Micro Business http://pinoy-business. om/incentives-for-barangay-micro-business-enterprises-bmbes A Barangay Micro Business Enterprise (BMBE) refers to any business entity or enterprise engaged in the production, processing or manufacturing of products or commodities, including agro-processing, trading and services (“services” exclude those rendered by any one, who is duly licensed by the government after having passed a government licensure examination, in connection with the exercise of one’s profession), whose total assets including those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated, shall not be more than Three Million Pesos (P3,000,000. 00). This definition, however, is subject to review and upward adjustment. Any qualified person, natural or juridical, or cooperative, or association, may apply for the inclusion in the BMBE Registry of a city or municipality. A Certificate of Authority is issued by the Office of the Treasurer of each city or municipality. This Certificate of Authority, which is valid for 2 years and renewable at 2-year intervals, enables the BMBE to avail of the benefits under the law.
These benefits include: Exemption from Taxes and Fees. All BMBEs shall be exempt from income tax for income arising from the operations of the enterprise. LGUs are also encouraged either to reduce the amount of local taxes, fees and charges imposed or to exempt the BMBEs from local taxes, fees and charges. Exemption from the coverage of the Minimum Wage Law. The BMBEs shall be exempt from the coverage of the Minimum Wage Law, but the employees shall nevertheless be entitled to the same benefits given to any regular employee, e. g. , social security and healthcare benefits. Technology transfer, production and management training, and marketing
