By Kris M. Crismundo
MANILA, March 11 (PNA) — The information technology-business process management (IT-BPM) industry has its position on the rationalization of fiscal incentives being pushed by the Committee on Ways and Means in Congress.
In the position paper of Information Technology and Business Process Association of the Philippines (IBPAP), the business group noted that removing income tax holiday (ITH) on incentives package of the government will be a disadvantage for the country in attracting foreign investments, particularly in the IT-BPM industry.
“The removal of the ITH as incentive puts the Philippines at a disadvantage with our neighboring countries in terms of attracting foreign investments. It must be noted that at present, the Philippines, with an income tax rate of 30 percent, has one of the highest income tax rates in Southeast Asia and this alone drives away investors from coming to the Philippines,” IBPAP stated.
In ASEAN, Indonesia, Malaysia, and Vietnam have corporate income tax (CIT) of 25 percent; Laos at 24 percent; Brunei Darussalam, Cambodia, and Thailand at 20 percent; Myanmar CIT rate ranges from 5.0 to 40 percent; and Singapore at 17 percent.
Aside from lower CIT rates, other ASEAN member-states offers more generous fiscal incentive packages.
Despite having the highest CIT rate and 20 to 30 percent higher business cost compared to ASEAN neighbors, IBPAP mentioned that firms still choose to locate in the Philippines because of the ITH incentive, aside from the good quality of Filipino labor force in the IT-BPM industry.
“Removal of the financial incentives in the form of the ITH will remove the long-term competitiveness of the Philippines in attracting new locators and convincing existing locators to expand in the Philippines versus other locations,” the business organization stressed.
“Midstream changes in the legal framework will materially affect the positive perception of the Philippine business environment and will impact, in an irreversible way, decisions to remain, expand, or set up new companies in the country,” it further said.
“With manufacturing and other sectors of our economy still unable to grow in output and employment capacity in a similar way as the BPM sector, with the dollar earnings of the BPM industry and overseas workers’ remittances as the only two pillars that are keeping the country’s balance of payments healthy, we suggest keeping the current business and legal framework governing the BPM industry stable and unchanged,” IBPAP added.
Moreover, the IBPAP cited a research of global management consulting firm Everest Group that incentives given by the Philippine government to the IT-BPM sector from 2004 to 2012 was estimated at Php792 billion.
On the other hand, the government gained about Php1.71 trillion in the same period through taxes withheld from both direct and indirect workers, indirect corporate tax from business entities spawned by the growth of IT-BPM companies, and VAT on consumption from direct and indirect workers. (PNA)