It’s not that Filipinos don’t want to have their own business. It’s because setting up (and closing) a legitimate business in the Philippines is complicated.
It has been made easier in the past few years. In World Bank’s 2019 Doing Business Report, the Philippines ranked 124th out of 190 countries. In 2020, we jumped to 95th place. But compared to our ASEAN (Association of Southeast Asian Nations) neighbors, we’re still lagging (7th out of 10 nations).
Starting a business in the Philippines means you have to contend with:
- the local government,
- the Bureau of Internal Revenue (our version of the IRS), and
- the Department of Trade and Industry.
The problem with these agencies is that their policies can be inconsistent. An example of this is the BIR. When we interviewed 2 employees from the BIR to help us write a blog post (for Filipino workers who want to pay taxes), they couldn’t agree on how to implement the same policies. Same with the local government. They have different business requirements depending on where you live.
To make things worse, sometimes these three agencies don’t coordinate with each other. This makes it hard for business owners to start and register their businesses quickly.
Depending on the type of business, you may also have to deal with other government agencies. If you have a food business, you would need sanitary licenses with the Department of Health. If you have employees, you work with the Department of Labor. This adds to the red tape and cost of starting a business.
Let’s say you’re done with all that and you’re lucky enough to have a profitable business. Yearly, you’ll have to pay up to 40 different types of taxes per year depending on the type of business (local taxes, national taxes, employment taxes, license renewals, etc). The cost is manageable for the most part. It’s the paperwork that complicates the process and takes so much time.
If you’re unlucky, the process of closing a business is even more convoluted. You can muddle through if you’re organized, and you managed to keep all your original paperwork. But if you lost your original paperwork, there’s the additional step of filing an affidavit of loss for all of them.
Let’s say you started a business but didn’t register with the government to avoid all the paperwork. It’s okay if you have a really small business. But as your business grows, you’ll have no choice but to register your business because you can’t do business with big companies without registration.
Here’s another complication.
Years ago we tried to get some office space for some of our OFS to come and work together.
We were told that in order to get an office you have to have a full, legitimate business set up. If you don’t, you can’t rent space. If you do manage to rent space, the local government is going to come check on the space and if you’re not legit you get in trouble.
We asked our OFS “what about just renting a house and putting computers and offices in bedrooms?”
Local government will find out and will shut you down.
With all these obstacles, it’s no wonder why Filipinos prefer employment.