Business processing group backs Senate version of tax reform package

The IT-Business Process Association of the Philippines (IBPAP) backed the recently passed Senate version of the first tax reform package.

The organization found the much needed legislative support to keep the tax perks that are crucial to stay competitive.

In a statement on Tuesday night, IBPAP President and CEO Rey Untal said the renewed investor confidence in the country is mainly because Senate pushed for a version of tax package that would “support the sound fiscal and regulatory environment” for the industry.

Senate has recently passed Senate Bill No. 1592, its version of the package which has dramatically different implications for the IT-BPM industry when compared to the bill’s counterpart in the lower house.

The House of Representatives, for its part, passed a version that would strip some of the tax perks that benefit the industry, a move which IBPAP opposed.

In particular, House Bill 5636 would slap a 12-percent value added tax (VAT) on the sale of goods once the government establishes an “enhanced VAT refund system.”

The current refund system has been heavily criticised for taking years for refund applications to be decided on.

On the other hand, the Senate bill would keep the zero-VAT status in the sale of goods and services.

“The industry has been facing a number of headwinds, which appear to have a dampening effect on IT-BPM investments during the first half of 2017,” Untal said, referring to the decline in new pledges in the past months this year.

“However, there is  a  renewed  investor  confidence  in the Philippines  primarily due to the recent developments in the TRAIN bill where Senate has continued to support the sound fiscal and regulatory environment for our sector by preserving the current incentives,” he added.

New investment pledges in the industry have been dropping since the second half of 2016, data from the Philippine Statistics Authority showed.

However, data from the Philippine Economic Zone Authority (Peza), the agency which registers most of the country’s IT-BPM investments, show that the decline is slowy being tempered.

According to the Philippine Economic Zone Authority (Peza), the contraction in new investments in the industry has reached 8.44 percent, dropping from P15.73 billion in January to October in 2016 to P14.4 billion in the comparative months this year.

Although still in a decline, this is already an improvement from the industry’s performance earlier this year. In the first five months of the year, the decline was nearly 35 percent, which was blamed on political uncertainties both here and overseas.

The call to at least maintain the status quo develops as the industry is forced to deal with new advancements in technology, which Untal said would “inevitably impact the Filipino workforce, as well as our future graduates.”

“We certainly support and laud all the lawmakers who have advocated and fought for the country’s competitiveness by maintaining a sound fiscal and regulatory environment,” Untal said.

The uphill battle, however, has not yet been won for the industry. Both chambers of Congress are currently trying to iron out the differences between their versions, which means the final bill would decide what would happen to the crucial tax perks.