THE Department of Finance (DoF) is considering an increase in the mandatory dividend contributions of state-owned corporations, as it seeks new sources of funding for a third stimulus package.
In an April 15 letter to House Speaker Lord Allan Q. Velasco, Finance Secretary Carlos G. Dominguez III recommended amendments to Republic Act No. 7656 which requires government-owned and -controlled corporations (GOCCs) to declare dividends to the National Government.
“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,” Mr. Dominguez said in the letter, a copy of which he provided to reporters.
One of the proposed amendments is raising the mandatory dividend remittances of GOCCs to at least 75% of its annual net earnings as cash dividends to the National Government, from the current 50%. Additional dividends may also be collected out of GOCCs’ accumulated earnings.
The DoF’s proposed amendments would cover the net earnings of GOCCs starting 2020.
Mr. Dominguez said proceeds from the higher dividend remittances may be used to finance the third stimulus program being proposed by lawmakers.
The DoF is also proposing to repeal provisions of several laws that exempted some GOCCs from making dividend payments.
These include the Bangko Sentral ng Pilipinas (BSP), Small Business Corp., Philippine Deposit Insurance Corp., Power Sector Assets and Liabilities Management Corp., National Transmission Corp., Tourism Infrastructure and Enterprise Zone Authority, Civil Aviation Authority of the Philippines, Veterans Federation of the Philippines and Duty Free Corp.
However, the DoF wants the Social Security System and the Philippine Health Insurance Corp. to be exempted from mandatory dividend remittances, along with the Government Service Insurance System, the Home Development Mutual Fund, and the Employees Compensation Commission, “provided members… make regular contributions to the said funds.”
The DoF also proposed to amend the definition of net income, which is the basis of their contributions, to include earnings raised from all sources including exempt income, income subject to final tax, franchise tax, other percentage taxes and other special taxes. Subsidies and grants from the National Government will not be included in the net earnings.
Any GOCC that fails to remit dividends would not be entitled to any performance bonus or incentive.
Sought for comment, the Governance Commission for GOCCs did not respond to queries at the deadline time.
Dividend collections from GOCCs increased to an average of P57.97 billion yearly since the Duterte administration started in 2016 from the P23.52-billion annual collections in the past administrations, said Mr. Dominguez.
State-run firms remitted a combined P21.44 billion in dividends to the Treasury in the first quarter of 2021.
Last year, dividend remittances hit an all-time high of P157 billion after the government asked GOCCs to remit their dividends ahead of time at the height of the coronavirus pandemic, when the state needed more revenues to fund its ballooning deficit.
The DoF is scrambling to raise more funds for the proposed third stimulus package, amid a renewed coronavirus surge and lockdown.
However, the economic team is aiming for a stimulus package that will not breach the deficit cap set earlier at the equivalent of 8.9% of gross domestic product (GDP).
Aside from GOCC dividends, other deficit-neutral fund sources should come from realigned agency budgets and other sources that can be tapped.
“Funding our social protection and economic stimulus measures was a challenge. Fortunately, we have ample borrowing capacity to absorb the large financial shock,” Mr. Dominguez said. — B.M. Laforga