January 30, 2023

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Financing-small biz bill gets House OK

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THE House of Representatives on Thursday approved on third and final reading a bill providing financing for small businesses, especially those crippled by the coronavirus disease-19 (Covid-19) pandemic and other significant economic challenges of national and international scope.

An overwhelming 282 votes of aye were given to House Bill 1, the “Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery, or “Guide,” Act.

The legislation seeks to provide financial assistance to distressed enterprises critical to economic recovery. The assistance would come via programs and initiatives by the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) to address liquidity or solvency problems of micro-scale, small-sized and medium-scale enterprises (MSMEs) and strategically-important industries, among others.

The assistance is expected to encourage the continued operations and maintain employment levels of these businesses.

The bill also expands the loan assistance programs, rediscounting and other credit accommodation facilities of LBP, DBP, the Small Business Corp. and the Agriculture Credit Policy Council (DA-ACPC).

MSMEs

HB 1 also identifies sectors and intended beneficiaries of various credit facilities, as follows: for LBP, players engaged in activities in the agribusiness value chain; and, for the DBP, eligible MSMEs engaged in infrastructure, services, service industry and/or manufacturing business.

The bill defines MSMEs as “any business activity or enterprise engaged in industry, agribusiness and/or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated.”

These assets must have value falling under the following categories: not more than P3 million for micro-scale enterprises; P3 million to P15 million for small-scale businesses; and, P15 million to P100 million for medium-sized enterprises.

LBP would be mandated to rediscount loans to eligible MSMEs.

The proposed law appropriates the amount of P10 billion for the expanded lending program: P2.5 billion for DPB and P7.5 billion for Land Bank.

HB 1 also increases DBP’s capital stock from P35 billion to P100 billion divided into one billion shares of P100 each to be fully subscribed by the national government.

The President may increase the bank’s capitalization upon recommendation of its board and the concurrence of the secretary of finance, the bill reads.

Exemptions

THE bill mandates the LBP and DBP to create a special holding company that would reinvigorate strategically-important companies experiencing liquidity issues due to significant economic challenges of national or international scope. These businesses were identified as belonging to the agriculture, infrastructure, services and manufacturing industries.

It also grants incentives and exemption privileges to the LBP, the DBP and the special holding company. These entities would be exempted from paying documentary stamp tax, capital gains tax, creditable withholding income tax, value-added tax, gross receipts tax and other taxes imposed under Republic Act (RA) 8424, or the National Internal Revenue Code of 1997 (as amended), for a period of three years.

The bill also grants these institutions exemption from RA 9184 (Government Procurement Reform Act) for mandate-related procurements for a period of three years. They would also be granted exemption from RA 10149 (GOCC Governance Act of 2011) and RA 10667 (Philippine Competition Act) for a period of three years for the acquisitions of the assets of an investee company.

“Thus, it is essential that these enterprises are given necessary access to credit and financial assistance,” the measure states. “It is hereby declared the policy of the State to protect employment and assist distressed enterprises to reinvigorate the economy.”

Oversight

THE measure creates a joint congressional oversight committee composed of five House members and five senators to oversee its implementation.

The Department of Finance, together with LBP, DBP, Bureau of Internal Revenue, Bangko Sentral ng Pilipinas and the Securities and Exchange Commission, would be mandated to issue implementing rules and regulations.

Speaker Martin G. Romualdez’s original co-authors of the proposed Guide Act were Senior Majority Leader and Ilocos Norte Rep. Ferdinand Alexander A. Marcos and Reps. Yedda Marie K. Romualdez and Jude A. Acidre of Tingog Party-list.