The young and English speaking population of the Philippine is the "key" to attracting more business process outsourcing (BPO) firms into the country even if the proposal to remove the value-added tax (VAT) exemption pushes through, according to real estate consultancy firm Santos Knight Frank.
House Bill 5636 or the Tax Reform for Acceleration and Inclusion passed on second and third reading at the House of Representatives late Wednesday. The bill seeks to lower income tax rates but at the same time removing VAT exemptions of various sectors and adjusting excise taxes on fuel and automobile as compensating measures.
Asked how removing the tax incentive of BPO firms would affect the Philippines as an investment destination, Santos Knight Frank Chairman and CEO Rick Santos said there are more important things that make the country attractive to investors.
"I think the demographics are key. The Philippines has the people which are the secret sauce to the growth of BPOs," he said.
If the measure makes it through the Senate and is enacted to law, a 12 would be imposed on the gross receipts of BPO companies.
"It really comes down to skills, the English, the age of the workforce ... Those are the imperatives for the BPO firms," Santos said.
However, removing the tax incentives of BPO firms must be studied deliberately and how it would impact on the sector.
"Because I think the incentives are great drivers for growth in that sector. I think that is an important to their expansion agenda," he said.
"Our view? The BPO industry is the biggest private sector employer today, with 1.5 million direct and 3.7 million indirect employees. The sector also contributed 8 percent to GDP (gross domestic product), with export revenues close to $25 billion," he added.
Santos noted a continuous dialogue between the sector and the government must be encouraged to come up with a "win-win" environment.
"We see fiscal incentives are important to encouraging the growth of BPO investments in the country," he added. — VDS, GMA News