The Department of Finance (DOF) is proposing to hike the mandated dividend remittances of government-owned and -controlled corporations (GOCCs) to the national treasury, to raise more funds for the country’s economic recovery amid the coronavirus disease 2019 (COVID-19) pandemic.
“We are proposing to increase the mandated dividend remittances of GOCCs to the national treasury from the current 50 percent to at least 75 percent of their net earnings,” Carlos Dominguez, Department of Finance (DOF) secretary, said during the Sulong Pilipinas virtual forum yesterday.
Dominguez shared with reporters via Viber his April 15 letter to House Speaker Lord Allan Velasco which includes the proposed amendments to several provisions of Republic Act No. 7656, otherwise known as An Act Requiring GOCCs to Declare Dividends under Certain Conditions to the National Government, and for Other Purposes.
“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 GOCCs to the national government,” Dominguez said , following his recent meeting with Velasco.
“Relative to this, we are sending herewith our initial ideas, which is attached here as Annex A, on the possible amendments to Republic Act No. 7656. We are continuously studying the matter and we will be providing you with an updated version as soon as available. In the meantime, we would be glad to further discuss this with you at your convenience,” he added.
Dominguez and Budget Secretary Wendel Avisado met with Velasco and other House leaders last April 8 to discuss the proposed Bayanihan 3.
According to the DOF’s proposed amendments to the Dividend Law, all GOCCs shall declare and remit at least 75 percent of their annual net earnings, instead of 50 percent.
Also, the dividends to be remitted to the national government are proposed to be only in cash, with the option that it be in the form of stocks or property to be removed.
The proposal also mentions that additional dividends may be collected out of accumulated earnings.
“All provisions of special or general laws which provide exemption from dividend payment, profit distribution, definition of earnings or of the dividend base, use of income… are hereby repealed. Such corporations shall adopt the provisions of this act,” a provision in the proposed amendment states.
The DOF’s proposed amendments to the Dividend Law cover net earnings of GOCCs starting 2020.
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 DOF shall not be entitled to any form of performance bonus or incentives.”
Meanwhile, in his speech, Dominguez also cited other remaining reforms that aim to raise additional funds for the Philippines’ recovery from the COVID-19 pandemic, broaden financial inclusion, and liberalize the economy to make it an investment-driven one.
“Even with the unprecedented crisis, the Duterte administration will continue to work hard until the last minute of its term to undertake the remaining reforms we had set out to do in our zero-to-ten-point socioeconomic agenda,” Dominguez said.
To continuously develop “a truly broad-based and inclusive financial system fit for the 21st century,” the Duterte administration will endorse the passage of a bill that seeks to deepen the domestic capital markets by building a sustainable corporate pension system, along with another measure that aims to save the military and uniformed personnel pension program by making it fiscally sustainable for the long term, Dominguez said.
As part of the measures to help strategically important businesses survive the economic shock of the pandemic, Dominguez said the Duterte administration has called on the Congress to pass the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery bill.
Dominguez said the administration will likewise push the passage of the two remaining packages of its Comprehensive Tax Reform Program — Package 3 which is designed to make the Philippines’ property valuation system at par with international standards; and Package 4 which aims to simplify the taxation of passive income and financial services and transactions.
Fully liberalizing the economy would involve amending the Foreign Investments Act, Public Service Act, and the Retail Trade Liberalization Act, which Duterte has certified as urgent measures to help speed up their congressional approval within his term, Dominguez said.
He added the government will also continue with its ongoing digital reforms at the Bureaus of Internal Revenue and of Customs, to ensure that these agencies “match the efficiencies of the best comparable institutions worldwide.” – Angela Celis
