Despite creating stronger middle class, BPO sector may lose tax perks

The Information Technology and Business Process Association of the Philippines (IBPAP) has underlined the BPO industry’s importance in economic advancement amid moves to slash government incentives.

IBPAP president and CEO Rey Untal

At the inauguration of another business process outsourcing (BPO) firm on Thursday, Sept. 13, IBPAP chief executive Rey Untal said the sector has contributed greatly to the Philippine economy.

“This industry, in fact, is the largest creator of jobs and as such, it is very critical to the economy,” Untal said. “But what not a lot of people know is that the industry is instrumental in creating a large middle class, which is going to be critical in our desire and aspiration to improve the lives of Filipinos.”

He said the organization remains optimistic in the country as more BPO firms are expanding their operations in the Philippines despite the challenges the industry is currently facing.

“In the past month alone, I have attended three similar events. Certainly, it gives you pleasure that this industry continues to thrive and grow despite some of challenges we are dealing with,” Untal added.

One of the risks that the BPO industry is facing is the possible lowering of fiscal incentives that the sector enjoys as part of the administration’s push for the second package of its tax reform program.

The second package of the tax reform program aims to modernize the incentive regime in the country by rationalizing the perks given by all the investment promotion agencies (IPAs), including the Philippine Economic Zone Authority (PEZA).

A big number of BPO firms are PEZA locators and are currently enjoying the 5-percent gross income earned (GIE) tax incentive that the IPAs are extending.

Under Package 2 of the tax reform program, the Department of Finance is seeking the scrapping of the 5-percent GIE incentive.

Earlier, Sen. Sherwin Gatchalian said the Senate committee on economic affairs is open in keeping the 5-percent GIE tax perk under the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) Bill or the second package of tax reform program.

Gatchalian added that the BPO industry, together with the electronics and semiconductor industry, contributes about 20 percent of the country’s gross domestic product. — Kris Crismundo (PNA)

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