Temporary tax relief for business enterprises and households also recommended
By Ben O. de Vera |Philippine Daily Inquirer
4:36 am | Thursday, October 2nd, 2014
MANILA, Philippines–The National Economic and Development Authority (Neda) has proposed the establishment of a “disaster loan fund” and the provision of temporary tax relief for households and business enterprises affected by calamities.
Learning from the experiences brought about by the battering of central Philippines by Super Typhoon “Yolanda” in November last year, the Neda also urged monetary authorities to widen financial assistance and credit flow to affected businesses.
In a report titled “Reconstruction Assistance on Yolanda: Implementation for Results,” the Neda said a disaster loan fund should be put in place in order to “provide needed liquidity to lending institutions in resuming their credit operations.” The fund may be provided by a government financial institution such as Land Bank of the Philippines, the agency said.
The report also proposed the “consideration of further bank guarantees.” To rehabilitate Yolanda-stricken areas, for instance, the operations of state-run small and medium enterprise (SME) lender Small Business Corp. should be extended, it said.
Neda also suggested “revisiting previously announced measures introduced by Bangko Sentral ng Pilipinas (BSP) to facilitate credit flow to the disaster-affected areas.”
“The banking sector plays a critical role in providing financing so that households can rebuild homes and enterprises can re-establish operations in Yolanda-affected areas. While there is a need to carefully assess the balance between sound monetary policies and liquidity in the banking sector, there is also the need to provide incentives for banks and microfinance institutions (MFIs) to extend credit at affordable interest rates and on favorable terms to boost lending in a risky environment,” the Neda noted.
It likewise recommended temporary business and property tax exemptions coupled with resource transfers to local government units (LGUs) after a calamity strikes.
“In many countries, temporary, time-bound tax relief schemes are put in place to reduce the indebtedness of groups such as households, small traders and micro-enterprises, following a disaster. In the Philippines, these groups often face acute shortages of cash, and often take loans (both formal and informal) to finance day-to-day expenditures,” Neda pointed out.
To ensure that local governments would continue to operate despite the lack of revenue, Neda further recommended introducing “a time-bound program of resource transfers to LGUs to enable them to provide temporary tax holidays on property and business taxes to affected households and enterprises.”
The Reconstruction Assistance on Yolanda (RAY) report issued by the government before the end of last year showed that 90 percent of the super typhoon’s total damage and loss impacted on privately owned businesses—SMEs as well as big corporations. In particular, the employment of locals in affected areas was also affected.
According to the Post-Disaster Needs Assessment (PDNA) of the Office of Civil Defense, Yolanda inflicted P89.6-billion worth of damage and P42.8 billion in losses across the economic, infrastructure and social sectors. P104.6 billion was needed to rebuild the areas devastated by the super typhoon.
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