The formality of the informal sector
Big and bureaucratic governments create the distinction between "formal" and "informal" economy. You want to put up a barber shop? A vulcanizing shop? A food shop? An internet shop? Government says "No, you cannot! Unless you register and secure the following licenses and permits, pay the corresponding fees, charges and taxes: (a) barangay clearance fee, (b) business location permit, (c) health and sanitation permit, (d) building and fire dept. clearance, (e) weights and measures fee, (f) other inspection fees, (g) mayor's business permit, (h) DTI registration, (i) BIR registration, (j) SSS registration, (k) DOLE registration, (l) NFA registration (for those retailing rice and corn), (m) real property tax, if your store or shop is also on the same compound as your house, and so on. These are separate from the various taxes you have to pay once you start operating, like VAT, documentary stamp tax, personal and corporate income tax, and so on.
This largely explains why the Philippine economy has one of the highest informal sector in the world -- about 43 percent of GDP, per WB estimates. So, unless you put up with those bureaucracies, paper work and taxes and fees, you are "illegal", "informal" and hence, "law violator", subject to various harrassments by various government forces.
And government cannot even repair the millions of potholes in the streets; cannot even catch and prosecute many robbers, kidnappers, extortionists and rapists. Hence, government should not over-regulate business and entrepreneurship, dipping its dirty and grubby fingers in entrepreneurial activities. And government should not introduce more and higher taxes.
A small businessman friend, Reuel H., has this to add:
"It's absolutely abhorrent that we small businessmen who have already put out so much in capital now have to cough up several thousands more just for these damned permits. We haven't even earned a single cross-eyed centavo from operations, and already the government wants its take?! What gives? I thought the government swears it wants to encourage enterprises to flourish? In this kind of environment? With these vultures in the bureaucracy waiting to feed on our carcasses?Is there some way we can get the government off our backs? I see no meaningful service that they provide in exchange for the blood, sweat, and tears we send them in the form of taxes. I'm not advocating anarchy here, but beyond keeping the peace, I see no other useful purpose that government serves."
This largely explains why the Philippine economy has one of the highest informal sector in the world -- about 43 percent of GDP, per WB estimates. So, unless you put up with those bureaucracies, paper work and taxes and fees, you are "illegal", "informal" and hence, "law violator", subject to various harrassments by various government forces.
And government cannot even repair the millions of potholes in the streets; cannot even catch and prosecute many robbers, kidnappers, extortionists and rapists. Hence, government should not over-regulate business and entrepreneurship, dipping its dirty and grubby fingers in entrepreneurial activities. And government should not introduce more and higher taxes.
A small businessman friend, Reuel H., has this to add:
"It's absolutely abhorrent that we small businessmen who have already put out so much in capital now have to cough up several thousands more just for these damned permits. We haven't even earned a single cross-eyed centavo from operations, and already the government wants its take?! What gives? I thought the government swears it wants to encourage enterprises to flourish? In this kind of environment? With these vultures in the bureaucracy waiting to feed on our carcasses?Is there some way we can get the government off our backs? I see no meaningful service that they provide in exchange for the blood, sweat, and tears we send them in the form of taxes. I'm not advocating anarchy here, but beyond keeping the peace, I see no other useful purpose that government serves."
posted by Bienvenido Oplas Jr | 8:10 PM
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