The Department of Finance (DOF) is in talks with the business process outsourcing (BPO) industry for an annual P8-billion subsidy in exchange for its support for TRAIN 2, a deal that will essentially trade the group’s sought-after tax perks for financial support.
Finance Undersecretary Karl Chua said that top officials of the Information Technology and Business Process Association of the Philippines (IBPAP) approached DOF for a “national skills upgrading program.”
In response, DOF counterproposed a compromise, even though this meant putting an end to an otherwise indefinite tax perk enjoyed largely by the industry.
“They claimed that we should help create the next or future talent pool. They said we need to fund training and scholarships so they proposed P8 billion per year,” he told the Inquirer.
Chua, however, said that this subsidy could not be granted on top of the current menu of incentives that the industry enjoys. DOF, which has been pushing for tax reform through several tax packages, has proposed an ultimatum.
“We told them, ‘So long as you agree to our proposal [for TRAIN 2], then we can consider your counterproposal,” Chua said.
“It cannot be in addition to the current [arrangement] because we’re already giving incentives indefinitely,” he added.
Chua was referring to the 5-percent gross income earned (GIE) tax, which companies registered under the Philippine Economic Zone Authority (Peza) pay in lieu of all taxes.
This perk will be removed under TRAIN 2, the Duterte administration’s second comprehensive tax reform package aimed at lowering corporate income tax while rationalizing tax incentives.
Such deal will force IBPAP to rethink its priorities, given that IT-BPM companies enter the country partly because of tax perks, but spend a significant amount in training Filipinos to make them fit for the job.
Chua said in a hearing last week that the DOF was more inclined toward giving “targeted subsidies,” rather than “giving incentives forever without accountability.”
The industry is the biggest private sector employer in the country, expecting to hit 1.8 million jobs in 2022. However, there is also difficulty in hiring the right talent.
For instance, the contact center sector, which has the bulk of the workforce in IT-BPM industry, has an employability rate of only 8 to 10 percent in the past few years.
This was according to Benedict Hernandez, chair of the Contact Center Association of the Philippines, who said in a previous interview that the sector had conducted near-hire training, which subjected job applicants to weeks of training in order to prepare them for the job.
This comes at a time when IBPAP aims to launch a so-called talent attraction portal that will match Filipinos with jobs that match their strengths.
IBPAP president and CEO Rey Untal earlier said this was partly a bid to make the industry “a first choice among many potential graduates.”
Chua said it was Untal and IBPAP chair of the board of trustees Lito Tayag who first pitched the skills program to DOF. Tayag heads Accenture Philippines, which has one of the biggest IT-BPM workforces in the industry.
Charlene Chan, IBPAP executive director for talent development, confirmed that the group was in talks with “government partners.”
“The National Upskilling Program is just one of the many programs of IBPAP and is still in the early stages of development. Initial consultations are underway and updates on its progress (are due) in two months’ time,” she told the Inquirer.