The finance and trade departments this month said they broke a more than 15-year impasse on income tax holidays, an exemption from income tax for up to eight years meant to attract investors.
The departments, which are concerned with tax collection and with attracting investment respectively, said they will propose to Congress that the incentive be scrapped from the Board of Investments' list of perks in exchange for a 15 percent income tax -- lower than the regular rate of 30 percent -- for 15 years.
They also said the Philippine Economic Zone Authority, where most BPOs get their incentives, can continue to give income tax holidays but only up to 4 years. The PEZA currently gives up to 6 years for BPOs in less developed areas. This has helped the fast-growing industry expand even after tapping out potential recruits in more developed areas.
"The change will make us less competitive," Jomari Mercado, president of the IT and Business Processing Association of the Philippines (IBPAP), said in a phone interview. "When you have a country like Malaysia getting more and more aggressive, and with ASEAN integration, that adds to the risk. Our incentive program will pale in comparison."
Mercado said 30 percent of BPO operations are now in less developed areas. But he says there's a benefit to ending the debate.
"In the worst-case scenario, I would rather the rules are clear," he said.
Mercado said IBPAP will press a partnership with the Commission on Higher Education (CHED) and state colleges and universities to make up in human resources what the industry will lose in tax breaks.
He said the first 600 participants in a CHED program tailored for BPOs are now in the 4-month internships that end the 2-year program.
He said under the program, college students sign up for an additional 21 units, including a 6-unit, 600-hour internship, meant to improve communication, critical thinking and other skills.
Mercado said the program now has 3,000 students in 12 colleges and universities, and the target is 20,000 students in 17 institutions.
source: www.abs-cbnnews.com
