H. Karthik of the Everest Group (left) together with Contact Center Association of the Philippines officials led by Jojo Uligan, its president (right), tackles issues and trends in the sector during a press briefing at the sidelines of the recent Contact Islands Conference at the Shangri-la Mactan Resort and Spa.
TRAIN 2
Removing incentives for corporations may make the Philippines lose investors to other neighboring countries.
According to global consulting and research firm Everest Group, other countries including smaller ones from all over the world are stepping up their game in wooing investors. And one of their biggest come-ons is incentives.
“In no country have we seen government stopped or reduce incentives. Investing in incentives on the part of government is economically beneficial,” said H. Karthik, a partner from the Everest Group.
“There is competition. They (investors) do get approached by multiple governments. Across the world, we see governments more interested in this sector,” he added regarding the business process outsourcing (BPO) industry.
Karthik gave the statement in reaction to the continued uncertainties hounding corporate incentives with the proposal of the Tax Reform for Acceleration and Inclusion (TRAIN) 2.
The proposal aims to “modernize and rationalize” corporate incentives currently being enjoyed by companies and locators in the country.
It aims to make incentives “more equitable and effective in creating jobs, industry development and attract more foreign direct investment and generate more revenues.”
The Philippine Economic Zone Authority (PEZA) currently grants a package of incentives to locators in PEZA-registered areas including income tax holiday of a maximum of eight years and a perpetual 5 percent tax on gross income earned (GIE), zero value-added tax on local purchases, and up to 30 percent of local sales, among others.
The TRAIN 2 is currently being deliberated in Congress. President Rodrigo Duterte, in his State of the Nation Address (SONA) last Monday, has urged the Congress to immediately approve the proposal as well as the other upcoming TRAIN packages.
According to Karthik, the uncertainty on incentives may negatively affect the BPO, business process management (BPM), information technology (IT), and contact center industries which is one of the few industries that have seen consistent growth in the last eight to ten years.
“All other industries have seen ups and downs. But this is one industry that’s seen steady growth and is likely to see growth. We need to continue to support this sector,” he said.
And removing or suddenly changing incentives is not a way to support the sector, he said.
Karthik also pointed out that the amount of money that the Philippine government would lose in incentives would be returned to the local economy many times more as it would have a multiplier effect in terms of more spending from employees in the industry.
Meanwhile, the Contact Center Association of the Philippines (CCAP) remains optimistic that their sector will be considered by the government in the final version of the TRAIN 2 to be approved.
CCAP President Jojo Uligan said they had been coordinating with government officials and that the association had submitted several position papers laying down the pros and cons to the industry with the provisions under TRAIN 2.
“The good thing is they talk to us. On the industry side, we’re happy they’re listening to us. It has positive and negative effects. Even until now, there’s continuous dialogue. But there’s still no final decision given to us,” Uligan said.
He added that there would be another scheduled meeting and dialogue with government on the proposal.
For his part, CCAP Board Chairman Benedict Hernandez also confirmed that other countries are aggressively attracting investors.
“Malaysia has been really topping in terms of attracting investors. We see competition spreading around the world,” he said.
But Hernandez also said that they would welcome the move of the government to continue talking with stakeholders like those from the IT and BPM industry.