BPO sector says no to removal of perks

The IT and Business Process Association of the Philippines (IBPAP), which represents the sector that has become one of the pillars of the Philippine economy, warned that provisions in the first tax reform package of the Duterte administration that would remove the incentives enjoyed by industry players could derail the industry from hitting its revenue target of $38.9 billion in 2022.

The first package of the government’s comprehensive tax reform program was passed recently in the House of Representatives in May and is now up for approval in the Senate.

While the group remained supportive of the package’s overall goal of lowering personal income taxes, IBPAP said it was  “petitioning the government to consider the negative impact on job creation that may happen if the incentives of the IT-BPM industry are removed.”

Prior to this, IBPAP has kept from publicly voicing out its concerns regarding the potential harms that may be brought about by the package, opting instead to file a position paper in Congress in March.

The release of the statement yesterday came amid strong support in Congress for the enactment of the measure into law before the end of the year, despite the warnings aired by affected industries, including the IBPAP.

“With the current model, there is flexible demand for our services allowing us to be competitive in the global market. This is because the margin of difference is counterbalanced by the high quality of service and talent the industry offers. However, should the tax reform bill remove the current incentives of the industry, this will increase the price differential further,” the statement read.

House Bill 5636, the version of passed in the House of Representatives, would remove the value added tax exemption on certain transactions of export-oriented firms, subjecting them to a VAT of 12 percent of gross receipts.

“This will impact our industry’s competitiveness in the global market, as well as the growth trajectories outlined in Roadmap 2022. More importantly, this will also impact job creation targets, including sectors that benefit from the 3.2 multiplier effect of the IT-BPM industry,” IBPAP added.

In its Roadmap 2022, IBPAP targets to post $38.9 billion in revenue in 2022 after hitting $22.9 billion in 2016.

Also, IBPAP has denounced the statement of Gerald Catapang, the administrator of Facebook community page Call Center Philippines, fully supporting the first package.

“Catapang’s personal opinion did not thoroughly take into account the economic impact of the TRAIN Bill in relation to affecting the industry negatively, and the potential job loss,” the statement read, referring to Tax Reform for Acceleration and Inclusion Act, or the first package.

Even before HB 5636 was approved, the industry has already been experiencing a slowdown in the entry of new IT-BPM investments, data from the Philippine Statistics Authority showed.