THE Department of Finance (DOF) has proposed increasing the mandated dividend remittances of government-owned and -controlled corporations (GOCCs) to the national treasury from the current 50 percent to at least 75 percent of their net earnings in a bid to raise funds for a possible third economic stimulus bill or Bayanihan 3.
Finance Secretary Carlos G. Dominguez made this proposal to House Speaker Lord Allan Velasco after their recent meeting to discuss funding sources for a possible third economic stimulus measure to help the country recover from the economic shock of the prolonged Covid-19 pandemic.
Dominguez and Budget Secretary Wendel Avisado met with Velasco and other House leaders last April 8 to discuss the proposed Bayanihan 3 that was principally authored by the Speaker and Marikina Rep. Stella Luz Quimbo.
“I agree with you that fiscal stimulus measures need to be backed up by adequate revenue sources. As mentioned, we are currently looking at the possibility of increasing the dividend rates remitted by government-owned or -controlled corporations (GOCCs) to the National Government (NG),” Dominguez said in his letter to Velasco.
Attached to Dominguez’s letter are some of the DOF’s proposed amendments to Republic Act 7656 or the GOCC Dividends Law.
The DOF’s proposed amendments to the Dividend Law cover net earnings of GOCCs starting 2020.
In its proposed definition of net earnings, DOF wants to include exempt income, income subject to final tax, franchise tax, and other percentage taxes and other special taxes.
Apart from its proposal to increase the mandated dividend remittances to 75 percent, DOF said “additional dividends may be collected out of accumulated earnings.”
The Finance department also wants to include Social Security System and the Philippine Health Insurance Corporation among the list of GOCCs exempted from the mandatory declaration and dividend remittance to the national government.
Instead of imposing fines or the penalty of imprisonment for violating the provisions of the Dividend Law, the DOF also proposed that “government corporations not in compliance with the provisions of this Act as determined by the Department of Finance (DOF) shall not be entitled to any form of performance bonus or incentives.”
Dominguez told finance reporters on Monday that he favors a deficit-neutral stimulus package.
The country’s finance chief also said during a press conference on Monday that they are currently in talks with Congress on Bayanihan 3.
Aside from looking into hiking the mandated dividend remittances of GOCCs to the national treasury, Dominguez said they are also exploring the possibility of cutting down non-essential government expenditures.
“Together, we are exploring additional sources of revenue to mitigate the impact of an expenditure program on our fiscal deficit,” he said.
Dominguez, who heads the President’s economic team, has repeatedly pointed out the need to keep the amount of fiscal stimulus measures within levels so as to keep the budget deficit manageable and not burden future generations of Filipinos with unsustainable debt servicing.
In a related development, the proposed Bayanihan to Arise as One will authorize the President to withdraw capital from GOCCs and increase their dividend remittances to fund the Bayanihan 3, a leader of the House of Representatives confirmed on Monday.
Citing the draft of Bayanihan 3, the cochairman of the House Committee on Economic Recovery Cluster, Rep. Joey Sarte Salceda, said all proceeds from the use of the President’s flexible powers under Bayanihan 3 to withdraw capital and adjust dividend remittances under the GOCCs Dividend law shall be used exclusively to fund the measure.
Upon recommendation of the Secretary of Finance, Salceda said the bill authorizes the President to order the withdrawal of capital from GOCCs under certain conditions.
“It also mandates the Secretary of Finance to draw up a list of GOCCs that can be mandated to increase dividend remittances to the national government,” he said.
Earlier, Salceda said he estimates that the increase the mandatory dividend remittances of GOCCs to 75 percent will probably result in P70 billion in additional revenues.
According to Salceda, the current draft of the technical working group (TWG) on Bayanihan 3 includes P108 billion for universal basic income of P1,000 per head, with another P108 billion in standby funds; P12 billion in direct funding for assistance for individuals in crisis situations (AICS) of the Department of Social Welfare and Development, and P3 billion for Medical Assistance for Indigent Patients (MAIP).
The draft bill also said that to assist Micro, Small and Medium Enterprises (MSMEs), the Small Business Wage Subsidy (SBWS) program of the Department of Finance (DOF), Social Security System (SSS), and the Bureau of Internal Revenue (BIR) shall be continued and expanded, especially to MSMEs highly impacted by the Covid-19 crisis.
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