Perks for local investors, better connectivity pushed
BPOS’ TAX INCENTIVES retained
While they welcomed the retention of the existing tax perks of the business process outsourcing (BPO) sector, local industry leaders are calling on the government to come up with better incentives especially for homegrown investors, improve connectivity and security, and address the basic requirement of availability of talents.
Michael Cubos, president of the Innovation Council of Cebu (ICC), said on Monday that he welcomed the assurance from the Department of Finance (DOF) that the existing sector’s tax perks would stay, but the sector should also not settle with this development.
Cubos was referring the DOF announcement last Friday stating that BPO companies need not worry about the government’s tax reform package, and they would continue to enjoy a number of fiscal incentives so the sector could sustain its robust growth.
In a statement, the DOF said foreign services of BPO firms operating within special economic zones (SEZs) will stay value-added tax (VAT)-exempt while those outsize SEZs, especially those registered with the Board of Investments, will keep their zero-rated status.
Finance Undersecretary Karl Kendrick Chua, in an Inquirer report, said that the proposed first package of the Duterte administration’s comprehensive tax reform program dubbed Tax Reform for Acceleration and Inclusion Act (Train) aimed “to limit the zero VAT rating to exporters and remove such a preferential treatment similarly accorded to suppliers of exporters, or what are referred to as ‘indirect exporters.’”
According to Chua, “the concerns raised by the BPO sector against tax reform appear to be misplaced.”
“They will remain competitive as demand for their services are driven by the high quality of service and talent they offer. The tax policy in the BPO sector will remain the same even after Train,” Chua said.
Tax package bucked
Industry organizations earlier bucked the proposed tax reform package which included the removal of the tax perks of BPO companies, saying that it could derail the industry from hitting its revenue target of $38.9 billion in 2022.
Furthermore, the removal of tax perks was seen to impact the industry’s competitiveness in the global market as well as the growth trajectories outlined in Roadmap 2022.
The industry is eyeing to post $38.9 billion in 2022 after hitting $22.9 billion in 2016 in the roadmap.
“There was nothing to worry about in the first place,” said Cubos, who sees the move as a welcome development especially to prospective investors.
He also said that a lesson he could glean from all this was the importance of having a proper forum and communications channel.
“The IT-BPM (business process management sector) had a panic attack, and no (one) even clarified the earliest from Congress and DOF that there is nothing to worry about,” he said.
Despite this development, Cubos said the industry should push for better incentives especially for the homegrown investors.
Cubos said current incentives are foreigner-centric, but the government could also offer preferred incentives for Filipinos willing to invest in the IT-BPM sector, particularly in the countryside.
Proposed perksCubos proposed perks included holidays on business and real property taxes as well as non-fiscal incentives such as government support, licensing, permits, business matching, and business development outside of SEZs.
Cubos proposed perks included holidays on business and real property taxes as well as non-fiscal incentives such as government support, licensing, permits, business matching, and business development outside of SEZs.
Wilfredo Sa-a Jr., managing director at the Cebu IT/BPM Organization (CIB.O), said the industry got what it hoped for.
“This is good for the entire industry, wherever it may be. Before, we were hoping that it will be retained at least in areas outside Metro Manila,” he said.
Issues to address
Sa-a also agreed that the government should also help address issues in the industry, which are better connectivity especially in the smaller cities, security and the availability of talent.
He said on the industry side, “we are already moving to address the availability of talents by introducing programs even down to the level of senior high schools, such as the Learning English Application for Pinoy (LEAP) initiative.”
This program is intended to improve the oral communication skills of graduates, with local BPO companies expressing willingness to supplement the program with their own in-house training so graduates become more employment-ready, he added.
With these initiatives in place, Sa-a said he is optimistic the IT-BPM (Information Technology-Business Process Management) industry will continue to grow.
He said that industry players are aiming to employ 200,000 people by 2019 from the current 150,000 workers in the sector.
Sa-a said the industry and academe can work together to help the industry grow, but connectivity and security are beyond these sectors.
“Having our teachers trained for the right skills is very important as well as starting talent preparation earlier,” he said.
Schools should encourage digital literacy at an earlier stage by having computer laboratories in elementary schools and the use of free online learning materials.
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