We need the proposed lower taxes to recover

By John Carlo Tria

As businesses, it is obvious that recovery from the economic effects of the pandemic is going to be a challenge.

The 17% unemployment, and the -2% growth in the first quarter can mean that the low growth will probably continue in the succeeding quarter, with a slight recovery by the end of the year.  Any rebound may happen in 2021.

The slow but safe return to business operations includes having to deal with the new normal.

It is challenging enough to recover under new operating environments where people are more cautious about their health and will not want enclosed or crowded spaces if they can avoid it. This is what will make restaurant patrons wary of dining in, or tourists from traveling.

These macroeconomic forecasts are generally going to reflect how many of our businesses are performing, though some, like the Business Process Outsourcing and export agribusiness sectors, both contributing about 10% each to our economic growth have active contracts and are expected to grow further.

We are still unsure about how  OFW remittances, equivalent to about 10% of our economic growth will perform, and tourism, which is 12% of our economic growth is obviously struggling, kept alive by necessary travel and accommodations needs that may pick up as restrictions ease.

To help businesses recover, the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) Bill is a welcome move.

Supported by 30 business organizations led by the Philippine Chamber of Commerce and Industry (PCCI), it calls for the immediate reduction of the corporate income taxes from 30-25%.

More importantly, a recovery boosting provision of the proposed law is the proposed five-year Net Operating Loss Carryover (NOLCO) allows businesses to carry over losses and deduct them from succeeding years’ taxes. This will allow them to recover such losses and plow more into operations, keeping more jobs or adding them in the process.

NOLCO is currently a provision for start-up companies to recover losses stemming from the first year of operations. The proposed measures will extend it and make it available even for current companies.

These measures are a response to the clamor of many businesses for tax breaks, on top of the deferred payments already under the Bayanihan Law.

The advice given by many business leaders is for you as a business to work closely with your accountants to lower costs that can be lowered and make necessary changes to operations to achieve lower fixed costs.

Working from home can actually lower overhead costs.  Forgoing other expenses can also help. The increased acceptance of online meetings removes many meeting expenses , especially for meals.