Angara to push ITBPO perks despite reforms

November 13, 2018
Sonny Angara
Sonny Angara

Senator Juan Edgardo Angara assured the information technology and business process outsourcing (ITBPO) industry that the upper chamber will fight for the retention of tax perks in support of the sector's growth, amid the administration's efforts towards the rationalization of fiscal incentives.

“You can count on all of us to fight for you and the jobs you created for the industry,” Angara said in his keynote speech at the International Innovation Summit in Taguig City on Monday.

On the sidelines of the event, he told reporters that the Senate Ways and Means Committee is still in the process of consulting and finding optimal incentives that are mutually acceptable to government and the private sector.

He said that the private sector, particularly the ITBPO industry, is amenable to scrap the perpetual granting of gross income earned (GIE) incentive given a transition period of 10 years.

The Department of Finance (DOF) wants a maximum of five years transition period for the GIE tax incentive. But Angara also noted that the DOF seems to be amenable with an extended period before eliminating the said tax perk, mostly given to companies registered with the Philippine Economic Zone Authority (PEZA).

Most of the ITBPO players in the country are PEZA locators.

Although ITBPO firms may still benefit from the GIE incentive for a longer period, it may be a different story for other industries. “We will have to look at different industries. DOF wants to give different treatment. There are other sectors that are enjoying for so long, enjoying 20 to 30 years, they are earning already,” the lawmaker said in Filipino.

“But BPO is really a recent phenomenon. The industry is still growing, so there are things to consider,” added Angara.

Angara mentioned that businesses, especially those PEZA-registered firms, are open to a higher income tax rate after GIE if taxes in the local government level are “folded in” to avoid unpredictable tax rules depending on local government units.

“What we’re hearing a lot is they want the local government taxes -- they really preferred local taxes to be folded in because it can be very unpredictable. What is the treatment in one locality could be different from another,” he said.

Industries are suggesting tax rate after GIE perk ranging between 7 percent and 10 percent, Angara said.

The senator noted that the upper chamber does not want to rush the rationalization of tax incentives under the second package of the administration’s tax reform program, given the global economic situation and the volatility of local market. “We protect the gains, ensure that we don’t send the wrong message to investors,” Angara said.