Podcast episode (host John Jonas) arguing that Filipinos are less likely to start businesses primarily because of bureaucratic obstacles: inconsistent and uncoordinated government agency policies (local government, BIR, DTI) create complex registration, licensing, and tax burdens (many licenses, up to ~40 taxes), plus practical barriers (difficulty renting office space without full registration).
Chapters
Hello and welcome to the Secret Sauce of Outsourcing Podcast, the podcast that's dedicated to making you better at outsourcing your work. My name is John Jonas and this is episode 39, why Filipinos Aren't Entrepreneurial. So it's not that Filipinos don't want to own their own business. It's because setting up and closing a legitimate business in the Philippines is complicated. So here's some data from World Bank's 2019 Doing Business Report. The Philippines is ranked 124th out of 190 countries. And in 2020 they jumped to 95th place. But compared to like the Southeast Asian countries, they're still ranked seventh out of 10. So starting a business in the Philippines is not super simple. And it means you have to contend with one, the local government, two, the Bureau of Internal Revenue, which is their version of the irs, and the Department of Trade and Industry. So the problem with these agencies is and their policies is that they can be inconsistent with each other. An example this is the is the bir, the Bureau of Internal Revenue. We interviewed two different employees from BIR to help us write a blog post for Filipino workers who want to pay taxes. And they couldn't agree on how to implement the same policies with each other. So that's why we interviewed two to try and figure things out. They disagreed with each other. So and it's the same thing with the local government there, they have different business requirements depending on where you live. To make things worse, sometimes these three agencies don't cooper coordinate with each other. And this makes it hard for business owners to start and register their businesses quickly. It's just not simple. So depending on the type of business, you'll also have to deal with other government agencies. Like, if you have a food business, you have to have a sanitary license with the Department of Health. If you have employees, you work with the Department of Labor. This adds up to red tape and costs for starting a business. It's a lot harder than in the us so let's say you're done with all that. You're lucky enough to have a profitable business. Yearly, you have to pay up to 40 different types of taxes per year depending on the type of business. Local taxes, national taxes and employment taxes, license renewals, et cetera. There's so much of it. The cost is manageable, but the paperwork is super, super complicated. And it just takes so much time to process. So if you're unlucky, process of closing a business is even more convoluted. You can muddle through if you're organized and you manage 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. So let's say you started a business, but you didn't register with the government to avoid all the paperwork. So it's okay if you have a really, really small business, but as your business grows, you have no choice but to register the business, because you can't do business with big companies without registration. So here's another complication. Years ago, we tried to get some office space in the Philippines just for our team to go in and work, like, in the same office where they could work together. No way. We were told in order to get an office, you have to have a fully registered business. We were like, well, we don't, so let's just go get one anyway. And they were like, no, you can't do do that. Nobody will rent to you. And if you do manage to get someone to rent to you, the local government's gonna find out because they check everything, and they're gonna come check your office, see what your business is, and when you don't have one, they're gonna kick you out, and it's gonna cause a problem. So we were like, okay, well, let's rent a house, and we'll just set up offices in the house. No way. That's not gonna work either. They said local government will find out, and they'll come in and shut you down. So with all these obstacles, it's no wonder why Filipinos are not entrepreneurial and why they prefer just being employed. It's so much easier.
