TAX ON MICROFINANCE?

Last month, December 2007, the Department of Finance together with the Bureau of Internal Revenue issued a Revenue Regulation No.142007, titled, “Tax on Nongovernmental Organizations (NGOs) and Cooperatives engaged in Microfinance Activities”. In the regulation issued, the government recognized the role of microfinance institutions in its poverty alleviation programs. RR No.142007, defined the term “Microfinance” as a credit and savings mobilization program exclusively intended for the poor to improve the asset base of households and expand the access to savings of the poor”.

Microfinance is being practice and is successful all over the world not just only here in the Philippines, but it is special here in our country considering the important roles it plays in our economy. The government realized the importance of microfinance entities in the country. Microfinance entities, basically helps the poor by providing funds or loans they need, whether for business expansion, additional capital or for personal use. Why is it many people opted to acquire the services offered by these microfinance entities? It is because, the regulations for the borrowing are not so strict or the application is not a tedious process. The funds are released in just lesser time with flexible interest rate programs. Also, it helps the economy by providing jobs for the jobless.



Considering the fast growing numbers of microfinance companies or entities or practitioners and the profits they make, then it came RR No.142007, removing tax exemption from these cooperatives from their microfinance activities and subjects NGOs engaged in microfinance to tax.


Now, what is the effect/s of tax imposition? As you all know, the growth of microfinance companies lies in the continuous patronage by the poor people and middle families, in the services they offered. Being taxed, microfinance companies profits are reduced, thereby decreasing their capability to grow or to expand their venture. Tax will lead to impediment to improve the services offered by microfinance companies. As a consequence, the rate of borrowing or the interest rate would increase, which it would then be burdensome to its clients, the poor Filipino people, considering the present economic situation of country. As they say that “microfinance is now the lifeblood of poor Filipino people or families”. Why does the government tries so much effort to make so many programs or jobs to alleviate condition of the poor. With microfinance which is a helpful program to them, then imposing a tax to companies who offered these services is a contrary act or intention of the government to help and alleviate the condition of the poor Filipino people.


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