Change in tax worries BPO clients

The Contact Center Association of the Philippines (CCAP), which accounts for a large chunk of business process outsourcing (BPO) revenues in the country, said that global companies were raising questions regarding the change in tax perks under the administration’s tax reform bill, a move which prompted the group to seek discussions with the government.

CCAP president Jojo J. Uligan said he was in talks with member companies to gauge the possible impact of House Bill 5636, which was passed in the House of Representatives on Wednesday before Congress adjourned.

The bill, serving as the first package of the administration’s comprehensive tax reform program, includes provisions that would trim the tax perks offered by the BPO industry, replacing some of them with a value-added tax (VAT) worth 12 percent of gross receipts.

This is one of the mechanisms that the bill seeks to offset the revenue losses of having lower personal income tax rates.

“There are companies asking what’s going to happen. [The perks are some of] the things why these global companies went to the Philippines. When we have these incentives, that’s how we compete [with other countries],” he said.

Uligan said that they were keeping their lines open for communication with the government in order to make the latter understand how the bill would affect the industry, adding that CCAP remained “optimistic.”

He said that the perks were important especially given that doing business in the country was “not the cheapest,” although there is still a lot of potential for the sector.

“We still want to grow,” he added.

The contact center sector expects to hit $20.4 billion in revenues in 2022, accounting for more than half of the target revenue of the whole Information Technology-Business Process Management (IT-BPM) industry of $38.9 billionin the next half decade.

In 2016, it employed more than 750,000 people while hitting $15 billion worth of revenue.

The Inquirer reported that the Information Technology and Business Process Association of the Philippines (IBPAP) filed a position paper in Congress last March airing its serious reservations over the bill that would have “irreversible” consequences to the industry.

Trade and Industry Secretary Ramon M. Lopez, however, told the Inquirer earlier last month that he would not support the position of IBPAP, noting that enough compromise had already been made.