Sen. Gatchalian Supports Keeping Current Special Tax Rate For Micro Entrepreneurs Under Pifita

Sen. Gatchalian Supports Keeping Current Special Tax Rate For Micro Entrepreneurs Under Pifita


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Senator Win Gatchalian expresses opposition to the proposed repeal of the 2% special tax rate for microfinance non-government organizations under the Passive Income and Financial Intermediary Taxation Act (PIFITA), the fourth tranche of the Department of Finance’s (DoF) comprehensive tax reform program.

Gatchalian says microfinance NGOs have been instrumental in providing low-interest, no collateral loans to poor vendors and other micro businesses and warns that to ensure their sustainability, any additional tax burden might be passed on to poor families and they may resort back to the “five-six” lending of loan sharks.

Currently, the savings from the 2% preferential tax rate allow microfinance NGOs to continue to provide financial and community services to their clients or program members.

“My fear is that if we impose a higher tax on this group, this is in effect a pass on cost and this will affect 6.5 million micro entrepreneurs across the country,” the senator said in the previous Senate committee hearings.

“I can see a disenfranchisement of these micro-entrepreneurs. More so, they will be pushed to the informal sector, which is the “five-six”
lending methodology. Some of them will just go to loan sharks. We don’t want this to happen. What we want is to promote entrepreneurship all the way down to the grassroots level, provide legitimate financing for them and help these micro-entrepreneurs to somehow grow into medium size,” he explained.

Sharing the Valenzuela experience, Gatchalian explains that the city provides funds to microfinance organizations which, in turn, lend money to small entrepreneurs. He said the payment rate is around 95 to 98 percent if borrowers take loans from microfinance operators instead of the borrowers getting it directly from the government.

Data from the Department of Trade and Industry show that there are a total of 1,003,111 business enterprises operating in the country as of 2018. Of these, 998,342 (99.52%) are MSMEs and 4,769 (0.48%) are large enterprises. Micro enterprises constitute 88.45% (887,272) of total MSME establishments, followed by small enterprises at 10.58% (106,175) and medium enterprises at 0.49% (4,895).

With barely two weeks before Congress goes on a break, the said tax measure is still being deliberated at the Senate committee level. The 18th Congress is working to pass all the remaining tax reform packages to meet the year-end target of the DOF.


Pinalagan ni Senador Win Gatchalian ang panukalang pagtanggal sa 2% special tax rate para sa microfinance non-government organizations
(NGOs) sa ilalim ng Passive Income and Financial Intermediary Taxation Act (PIFITA), ang ika-apat sa comprehensive tax reform program ng Department of Finance.

Kinilala ni Gatchalian ang kahalagahan ng mga microfinance NGO sa pagbibigay ng mababa at walang collateral na pautang sa mahihirap na vendors at iba pang maliliit na negosyo. Nagbabala si Gatchalian na maaring bumalik ang mga kababayan natin sa ‘five-six’ na mga pautangan kung sakaling itaaas ang kasalukuyang tax rate para sa microfinance NGOs dahil sa posibilidad na ipasa ito sa mga nangungutang sa kanila na karamihan ay galling sa mahirap na pamilya.

“Ang kinatatakot ko ay kung magpapatupad tayo ng mas mataas ng buwis sa grupong ito, maaring maapektuhan ang may 6.5 milyon na micro entrepreneurs sa buong bansa,” ani Gatchalian.

“Ang ikinababahala ko ay muli na namang babalik ang ating mga kababayan sa ‘five-six’ na pautangan na kung saan ay mas mataas ang interes na ipapataw sa utang nila. Ang layunin natin ay i-promote ang entrepreneurship sa grassroots level, at bigyan sila ng lehitimong puhunan upang mapalago nila ang kanilang negosyo,” dagdag ng senador.

Sa Valenzuela, sinabi ni Gatchalian na ang siyudad na mismo ang nagbibigay pondo sa microfinance organization, na siya namang nagpapautang sa maliliit na mga vendor. Aniya, mas mabilis na nakakabayad ng utang ang mga humihiram sa microfinance NGOs kesa sa direktang umuutang sa gobyerno.

Batay sa datos ng Department of Trade and Industry noong 2018, mayroong higit isang milyon (1,003,111) na mga negosyo ang may operasyon sa bansa. Siyam na raan at siyam napung libo (998,342) o 99.52% sa kanila ay micro, small, and medium enterprises (MSMEs) at 4,769 ang bilang ng malalaking kumpanya.

Ang bilang ng mga pinaka maliliit na negosyo o micro enterprises ay nasa 887,272 o 88.45%, samantalang may 106,175 o 10.58% na small enterprises at 4,895 o 0.49% ang medium enterprises sa bansa.

Ang PIFITA ay pasado na sa Mababang Kapulungan ng Kongreso pero hanggang ngayon ay pinagdedebatehan pa ito sa committee level ng Senado. (

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