Senate’s tax reform bill provision opposed

The cost of doing business in the Philippine business process outsourcing (BPO) sector would be about 20 percent higher than that in India if the Senate version of the first tax reform package would be implemented.

Rey Untal, president and CEO of the IT and Business Process Association of the Philippines (IBPAP), said certain provisions in the Senate bill would jack up the cost of doing BPO business in the country and this would further widen the gap between the local cost and that in India, the world’s biggest BPO hub.

Senate Bill 1408 imposes value-added tax (VAT) on indirect exports of goods and services.

Moreover, an industry source told the Inquirer that the Philippine BPO industry, even without the VAT, was already 13 to 15 percent more expensive than that of India.

Under SB 1408, the government would remove the VAT exemption not only of indirect exports, but also of the sale of services, which, Untal said, accounted for the “bulk of the industry.”

This is different from House Bill 5636, the version of the tax package passed in May in the House of Representatives, which retained the VAT exemption on the sale of services, while slapping a 12-percent VAT on the sale of goods by indirect exporters.