The 2014 Investment Priorities Plan could mean the end of an era for government-backed incentives as the Board of Investments (BoI) has stated that most outsourcing companies have already attained ideal growth. The government body is expected to reduce the set of incentives enjoyed by the business process management (BPM) industry of the Philippines.
BoI Director for Industrial Policy Service Corazon Halili-Dichosa said incentives will be fewer and will be given to sub-sectors that are still underdeveloped, especially the segments that are missing in the supply chain.
Some of the benefits given to tenured BPO projects under the BoI are tax holidays for a span of six years, exemption from import duties and taxes, zero-rate VAT on sales, more deductions on top of taxable income equivalent to 50 percent of the wages of additional workers in the direct labor force, and local businesses will be tax-free up to six years.
However, the BoI has created a new set of incentives for the BPO sector under the 2014 IPP, but it is still waiting for the approval of President Benigno Aquino. Dichosa further noted that although incentives are given only to segments with export services, the information technology-business process management sector should consider new opportunities, and if they cater to the local market, they will not receive incentives. She explained that BPO segments which provide services to the local market are barred from getting tax perks.
The 2013 IPP indicates that locally-owned call center companies are still allowed to receive incentives but 50 percent of their sales should come from clients abroad. On the other hand, call centers owned by foreign clients are eligible to get incentives as long as 70 percent of their sales are from exports.
Meanwhile, the IT-Business Process Association of the Philippines asked the BoI to retain the incentives given to the IT-BPM industry to help their efforts in developing value-added segments.
As for the 2014 IPP, the Trade Department said they would be more selective when it comes to the segments that will be entitled to get incentives.