Call centers may not make it to DOF’s tax perks list

by Roy Stephen C. Canivel, Philippine Daily Inquirer, Aug 9, 2019

The Department of Finance (DOF) thinks the voice sector of the business process outsourcing (BPO) industry should not be prioritized for tax incentives, since the sector is already competitive enough.

In a roundtable discussion with the Inquirer, Finance Undersecretary Karl Kendrick Chua questioned why the voice services sector, which had been the global leader for several years now, still needed to have tax perks.

Backed by a more favorable political climate in Congress, the Duterte administration is renewing its push to pass its second tax reform package, which will gradually lower the corporate income tax while rationalizing the incentives given to industries.

The Board of Investments, the investment arm of the Department of Trade and Industry, has the power to choose industries eligible for tax incentives under the new regime.

In the end, however, the DOF remains the central figure peddling President’s Duterte’s comprehensive tax reform program.

“That [sector] would be, in my opinion, not a priority. We should give priority to those where there is really competition,” Chua said on Wednesday evening, referring to the nonvoice service of the BPO industry.

The Philippines would be top of mind for BPO players in the voice services, considering the top-notch talent it offers: English-speaking Filipinos.

Nonvoice services, on the other hand, are jobs that are not dependent on a BPO worker’s ability to speak fluent English, such as medical transcription, accounting and finance. Thus, companies can always choose to locate in countries that offer better alternatives.

“They don’t require the agent to speak. So we think they should be [assisted] because they are going to move out of the country, to Vietnam, or China, or even India. But the voice sector, in our view, has no competition at all,” Chua said.

It remains to be seen how the industry will be affected by the change in policies, especially since much of its growth is still largely dependent on how well the voice services sector will perform.

Based on the industry’s current road map, the voice services sector is expected to account for nearly 60 percent, or $22.2 billion, of the industry’s total revenue target of $38.9 billion by 2022.

Adding to the industry’s woes, Malacañang, through an administrative order, has already banned new BPO projects in Metro Manila from getting tax incentives.

“We’re thinking, why give incentive to this industry when you have comparative advantage? Besides, why also give incentive to an industry that you know is going to be affected by artificial intelligence?” he said.

“They’re going to transform anyway in the future, [so maybe the] incentive [could be allotted] for other more deserving sectors,” Chua added.