Philippine BPOs can't be 'too expensive' vs India: industry group

Jessica Fenol, ABS-CBN News

Posted at May 02 2018 09:25 AM | Updated as of May 02 2018 02:03 PM

Call center agents wait for calls from their US clients as they work overnight in Manila's Makati financial district February 6, 2012. Erik De Castro, Reuters/FILE PHOTO

MANILA - The second tranche of tax reforms should not diminish the competitiveness of the country's business process outsourcing sector, which is is also preparing for the inevitable shift to automation and artificial intelligence, an industry group said.

Outsourcing is price-sensitive and the Philippines cannot afford to be "too expensive" compared to chief rival India, which has both the scale and skills, said Rey Untal, CEO of the IT and Business Process Association of the Philippines or IBPAP.

"Ang point lang namin is that whatever change that we will go through, let’s make sure that it will not adversely impact our competitiveness, kasi our competitiveness is critical to our growth," Untal told ABS CBN News.

(Our point is, whatever change that we will go through, let's make sure that it will not adversely impact our competitiveness because it's critical to our growth.)

Under the second batch of reforms, the government seeks to lower the corporate income tax rate to 25 percent from 30 percent and "rationalize" some incentives.

The first tranche, which took effect at the start of the year, reduced personal income tax rates and raised duties on fuel, cars and sugar-sweetened drinks.

Some of the proposed tax incentives for companies will be income-based, Finance Usec. Paola Alvarez said.

"There would be more companies that would be benefiting from the lowering of the corporate income tax than those who are actually just receiving these incentives," she told ANC.

The BPO industry is collaborating with government on the second batch of tax reforms, Untal said, adding, "at the end of the day we know that there’s something good."

Philippine Airlines, already reeling from higher fuel prices, said it might be affected by the removal of tax perks under package 2.

Based on office space take-up, the BPO industry saw "slower than anticipated growth" of 46 percent in 2017, compared to 77 percent in 2016, said Untal.

Socioeconomic Planning Sec. Ernesto Pernia in January urged the BPO industry to upgrade its workers' skills, saying growth in the sector was slowing as companies look increasingly towards artificial intelligence.

Despite the risk flagged by government, Untal said the BPO industry was targeting to grow its workforce to 1.8 million by 2022 from the current 1.2 million.

"Forecast na natin na the growth will be different from the growth that we experienced before," he said.

(Our forecast is that the growth will be different from the growth we experienced before.)